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Deal removes roadblock to vote on Allergan’s board of directors

The head office of Valeant Pharmaceutical.

RYAN REMIORZ/THE CANADIAN PRESS

A major roadblock has been cleared in Pershing Square Capital Management LP's attempt to get a vote of Allergan Inc. shareholders on the removal of a majority of Allergan's board.

Pershing Square, headed by activist shareholder Bill Ackman, and Botox-maker Allergan said on Friday that they have reached an agreement in which Pershing Square will drop its lawsuit against Allergan.

The suit in a Delaware court concerned Allergan's ability to trigger a poison pill to block a takeover attempt.

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"This resolution provides the clarification we were seeking to allow Allergan shareholders to proceed with the process of calling a special meeting without fear of tripping the pill," Pershing chief Bill Ackman said in a statement. Investors holding 25 per cent of Allergan's shares need to support the call for a special meeting for one to be held.

The agreement avoids a trip to court for the companies after Pershing Square sued Allergan, arguing that the company's bylaws were making it difficult to gather the required support. Pershing Square is the key partner in Laval, Que.-based Valeant Pharmaceuticals International Inc.'s attempt to take over Allergan.

"The two sides just simply agreed on the way Pershing could go about and solicit votes without triggering the pill," an Allergan spokesperson said.

Pershing Square must still get the okay from the U.S. Securities and Exchange Commission before it can than start soliciting shareholders, he said.

Quebec-based Valeant said the settlement ensures that Pershing's efforts to call a meeting won't further be delayed.

"We remain committed to the value-creating combination of Valeant and Allergan and are moving forward with our exchange offer," said spokeswoman Laurie Little.

BMO Nesbitt Burns analyst Alex Arfaei said the deal puts Valeant "another step closer" in its pursuit of Allergan. Furthermore, Mr. Arfaei said that with hedge fund manager John Paulson's reported recent support of a deal, Valeant and Pershing need about another 13 per cent to call the special meeting. "Given the significant overlap in Valeant and Allergan investors, we continue to believe that Valeant and Pershing Square should eventually be successful in their attempts to gain support from 25 per cent of Allergan shareholders to call the special meeting in an attempt to change the Allergan board," he wrote in a report.

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Allergan has rejected Valeant's $53-billion (U.S.) hostile bid, claiming that it is better off as a standalone company among other arguments.

Pershing Square is Allergan's largest shareholder with almost 10 per cent of the shares.

Valeant is also attempting to get Allergan shareholders to vote directly on the offer of $72-a-share in cash and 0.83 shares of Valeant stock per Allergan share.

Allergan says the offer undervalues the company and creates significant risks and uncertainties for its shareholders.

With files from The Canadian Press

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About the Author
Quebec Business Correspondent

Bertrand has been covering Quebec business and finance since 2000. Before joining The Globe and Mail in 2000, he was the Toronto-based national business correspondent for Southam News. He has a B.A. from McGill University and a Bachelor of Applied Arts from Ryerson. More

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