In 2014, the Allergan Inc. board of directors received a surprise takeover offer from Valeant Pharmaceuticals in alliance with hedge fund activist Bill Ackman's Pershing Square Capital Management. In the unprecedented arrangement between an acquirer and a hedge fund activist, Pershing Square had quietly amassed a 9.7% stake in Allergan prior to the Valeant bid, making Pershing Square Allergan's largest shareholder. The case presents students with many of the decisions Allergan's directors faced amid challenges to Allergan's governance, management, and business model. In particular, the Allergan board must decide whether to pursue a $10 billion acquisition of Salix Pharmaceuticals while under threat of a proxy contest and a special shareholder meeting to vote on replacing Allergan's directors with a slate more favorable to the Valeant merger. The proposed Salix acquisition would give Allergan a new therapeutic market but would also make Allergan too big for Valeant to acquire.
The case invites students to examine enduring and fundamental questions about corporate governance in the context of an unsolicited takeover bid, including the role of the board, the role of management, and the rights of shareholders. The case also provides insight into changing norms of governance and the increasing power of shareholders, and allows for discussion of topics such as the relation between governance and strategy, the varied interests of investors, differing approaches to value creation, the legal aspects of contested takeovers, and board responses to hedge-fund activism.
Corporate Governance, Litigation, Mergers & Acquisitions, Shareholder Relations
Geographic: US and Canada
Event Year Begin: 2014
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