Late last week, Botox-maker Allergan Inc sued Valeant Pharmaceuticals and Pershing Square, alleging the latter two had engaged in insider trading when Pershing bought $1 billion worth of Allergan shares ahead of a takeover offer by the hedge fund and Valeant. On the suggestion of wrongdoing, Valeant called with charges “baseless,” while Ackman stated in a press release that “This is a shameless attempt by Allergan to delay the shareholders’ fundamental right to call a special meeting and vote their shares. Allergan is threatened by our progress toward calling the special meeting. This scorched-earth approach is further evidence of the board’s and management’s further entrenchment.”
Not entirely convinced? Dealbook‘s Andrew Ross Sorkin, who in his column today says WAIT JUST A SECOND, PEOPLE.
There was no secret phone call or briefcase full of money. Instead, Valeant’s chief executive, J. Michael Pearson, called Mr. Ackman directly and told him about his company’s intent, seeking a partnership of sorts in which Mr. Ackman would build a large position in Allergan stock and help Valeant press Allergan’s board to acquiesce to a deal…Still, something hasn’t smelled right about these clever machinations. An analyst at Sanford C. Bernstein quite rightly titled a report “How Can It Be Legal?” [...] Whatever the case, Valeant and Mr. Ackman’s actions, at least from a public policy perspective, may have been too clever by half. When Sanford C. Bernstein wrote a note to clients at the time the offer was first announced, it described Pershing Square as having found an opportunity for “regulatory arbitrage.” Now a judge will decide whether it was truly regulatory arbitrage or something more sinister.