Allergan Inc., the target of a hostile takeover offer from Valeant Pharmaceuticals International Inc. and Pershing Square Capital Management, has launched a shareholder rights plan as a roadblock against the bid.
California-based Allergan said late Tuesday that it will declare a dividend distribution of one preferred share purchase right for each outstanding share of the company’s common stock.
The plan, known as a “poison pill,” would create a large number of new shares. “It is not designed to prevent an acquisition of the company on terms that the board considers favourable to, and in the best interests of, all stockholders,” Allergan said. “Rather, the plan aims to provide the board with adequate time to fully assess any proposal.”
Under the plan, stockholders of record on May 8, 2014, will receive one right for each share of Allergan common stock held on that date. The plan is scheduled to expire on April 22, 2015.
The rights will become exercisable if a person or group acquires ownership of 10 per cent or more of Allergan’s common stock.
Pershing Square, a hedge fund led by shareholder activist Bill Ackman, has accumulated 9.7 per cent of Allergan shares, worth more than $4-billion. Pershing and Valeant have made a $50-billion cash and share bid for Allergan. They say they will squeeze $2.7-billion in costs out of the merged venture.
Michael Pearson, Valeant's chief executive officer, said during an interview on CNBC on Wednesday that he was “disappointed” with Allergan’s poison pill.
“We are disappointed but on the other hand, I think this deal will get done,” Mr. Pearson said.
With a file from Reuters