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If that doesn’t fit the corporate timetable, for example if the date of the meeting has already passed for the current fiscal year, you can also solicit shareholders to call a Special Meeting of Shareholders, for the same purpose and with the same intent. Most corporations allow for this in their by laws, including Allergan. In Allergan’s case this requires solicitation of a minimum of 25% of shareholders’ votes though to do so, which again is not unusual.
While Bill Ackman had already launched such a solicitation process, this has, naturally, already been countered, too, by a recommendation from the Allergan Board to its shareholders to deny the request. More importantly, however, a somewhat esoteric, but possibly quite crucial, legal issue has now come up of how Allergan’s poison pill relates to this process.
The standard plain vanilla shareholder rights plan, a.k.a. poison pill, that Allergan instituted when Valiant began its bid calls for heavy dilution of any potential aggressor who acquires, singly or in concert, or has arrangements, with shareholders holding in total more than 10% of its shares.
So by the deliberately vague language used in designing the pill legal doubt is already created in Pershing Square’s mind, and in the mind of many of Allergan’s institutional shareholders, as to whether simply the act of soliciting proxies for calling a Special Meeting of Shareholders, never mind what decisions such a meeting might take, could immediately trigger the poison pill by shareholders who should respond to it. If it does this would then become very expensive for many of the company’s ordinary institutional shareholders.
Since it seems Allergan’s lawyers, who drafted the shareholder rights plan, have – no surprise here – not been particularly helpful in laying the issue to rest Pershing Square has now gone to court to ask for a ruling. Bill Ackman may or may not even obtain a favourable resolution in the courts, but it certainly also is a good way to try to change the subject from its partner Valeant’s claimed business shortcomings, as increasingly stridently asserted by Allergan in its takeover defence.
Mr. Ackman said with the legal filing, “We regret that we were forced to file this lawsuit, ” adding, “Allergan’s failure to confirm that its poison pill does not apply to the actions taken in furtherance of calling a special meeting is a blatant attempt to frustrate shareholders’ ability to express their views and exercise their rights.”
So far Allergan has not offered any official comment; but one may imagine they are to date not displeased with the way events have been unfolding for them in what is a mark of the return, after many years of absence, of the hostile takeover – once a common feature of the US business landscape. The language of war includes the term the “theatre of war, ” and with this lawsuit there is also another term that comes to mind perhaps – the “theatre of the absurd.” Take over battles, including complex and expensive ones like that for Allergan, can be a little bit of both these days.
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