Allergan Takeover Bid

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Cornerstone Research worked with two experts who testified on Rule 14e-3 allegations that a hedge fund violated federal securities law on disclosures in cash tender offers.

Retained by Latham & Watkins and by Wachtell, Lipton, Rosen & Katz

When Valeant and Pershing Square Capital Management, a hedge fund, made a public announcement of an intended acquisition of Allergan in April 2014, a protracted takeover battle ensued. Pershing Square had acquired a 9.7 percent block of Allergan shares in stock and option transactions prior to the formal announcement of the tender offer for Allergan by Valeant. Allergan filed a lawsuit against Valeant and Pershing Square alleging that both firms violated Rule 14e-3 of the Securities Exchange Act of 1934 when Pershing Square acquired shares of Allergan while in possession of material nonpublic information relating to Valeant’s tender offer.

The court found that Allergan raised serious questions about whether the defendants’ conduct violated Rule 14e-3.

Counsel for Allergan retained Cornerstone Research and two experts, Professor Stephen Choi of New York University School of Law, and a proxy process expert. Professor Choi testified on the purpose and economic rationale underlying the provisions of the Williams Act. He provided additional testimony on the meaning of “offering person” under Rule 14e-3 in the context of Pershing Square’s involvement in the takeover bid. Professor Choi also opined on the meaning of “substantial steps” under Rule 14e-3 as applied to the actions of Valeant and Pershing Square. The proxy expert offered empirical evidence that tender offers are typically used in conjunction with proxy battles in the context of hostile acquisitions.

The court found that Allergan raised serious questions as to whether the defendants’ conduct between February and April 2014 violated Rule 14e-3 and ordered the defendants to make corrective disclosures in their proxy solicitation statement. Allergan was eventually acquired by Actavis plc.


For additional information on this matter, please contact Katie Galley or Sasha Aganin.

Case Expert

Stephen Choi

Bernard Petrie Professor of Law and Business,
School of Law;
Director, Pollack Center for Law & Business;
New York University