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While federal judge David Carter said Allergan had raised ” serious questions” about the legal implication of Bill Ackman’s Pershing Square and Valeant’s $53 billion takeover bid, he stopped short of barring them from voting in the shareholders meeting in December. He asked that Ackman and Valeant provide additional documents, since it is possible their hostile takeover bid, which occurred not long after Ackman purchased a large stake in Allergan, which is now 9.7%, might have violated insider trading rules. The federal judge said the event was similar to “warehousing” an illegal practice, characterized by gathering shares ahead of a planned bid, as reported by the Wall Street Journal.
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Judge Carter stated, “Although there is something inherently appealing about preventing someone who may have violated securities laws from using their allegedly wrongfully-acquired shares to carry out their ultimate plan … the court doesn’t believe in injunction is appropriate at this time and in this case.”
The basic takeaway is that both Allergan and Ackman can see the glass half full in this ruling or half empty. Allergan was pleased at the implication that Valeant and Ackman did something improper, but plans an appeal. However, if Valeant and Pershing get nothing more than a wrist-slapping, as this might seem to be if the appeal fails, there will be no wonder if there are copycat cases in the future.
