In June 2014, Valeant Pharmaceuticals (NYSE:VRX, TSE:VRX) offered a tender bid for the Irvine, Calif.-based company which was followed by a 7 month-long hostile pursuit by Valeant and co-bidder Pershing Square Capital Management. In November 2014, Allergan publicly announced that it had accepted a $66 billion takeover bid from Actavis.
The SEC said that Allergan told investors that the company wasn’t engaged in merger talks and that Valeant’s bid was inadequate.
“Allergan failed to fully and timely disclose information about potential merger transactions it was negotiating behind the scenes in response to the Valeant bid,” SEC’s New York regional office director Andrew Calamari said in a prepared statement. “As outlined in our order, Allergan was slow to act even after SEC staff reminded the company about its disclosure obligations.”
Allergan had merger talks in mid-2014 with an unnamed North Carolina-based company that it never revealed to investors, according to the SEC, and after those talks fell through, Allergan did not disclose its talks with Actavis in a timely manner.
Allergan Plc spokesman Mark Marmur reportedly said in a statement that Allergan Inc, the company’s subsidiary, agreed not to engage in future violations as a part of the settlement and that the SEC had not accused the subsidiary of any intentional wrongdoing.
In November 2015, a U.S. judge said Valeant and hedge fund manager William Ackman must face a lawsuit accusing them of insider trading in Allergan before making their unsuccessful takeover bid. The U.S. District Judge David Carter in Santa Ana, Calif., rejected Valeant and Ackman’s argument that the lawsuit should be dropped because their activity was not fraudulent.
The lawsuit was filed on behalf of investors who sold Allergan shares in the 2 months before the pair announced the unsolicited $51 billion bid for Allergan.
By then, Ackman’s Pershing Square Capital Management had amassed a 9.7% stake in Allergan, which surged in value after the takeover bid was announced. Investors alleged that Ackman’s hedge fund bought the shares knowing that Valeant was launching a bid that could become hostile.
Valeant and Ackman fought back, insisting that there was no intent to defraud and that they breached no duties by sharing information before disclosing the bid to the public.