Valeant and Pershing are each circulating to Allergan shareholders extensive PowerPoint
presentations setting forth their investment theses that a combined company will provide
higher value to Allergan shareholders than Allergan on a stand-alone basis. Allergan has
countered with its own PowerPoint presentation arguing the superiority of the company on a
stand-alone basis. Valeant and Pershing have begun a road-show to make their case in
person to the larger Allergan shareholders, and Allergan has mounted a counter road-show.
To “call the question,” so to speak, Pershing is also commencing a straw-poll type proxy
contest by seeking a non-binding majority vote of Allergan shareholders to support the
Valeant bid. In short,
both sides are trying to win the hearts and minds of a majority of
Allergan shareholders, a contest that depends on the relative effectiveness of the parties’
communications arguing the superiority of their competing business plans.
Lessons learnt from Target
Need to monitor trading in the company’s stock and options
in order to have as
much notice as possible of a possible threat.
Need to define a compelling “message” and to deliver it consistently.
advantaged in the process by a) quickly developing a coherent and compelling message
that cast serious doubt on Valeant’s business and growth plans and b) delivering the
message consistently and effectively throughout the process.
Target shareholder patience, providing the company with reasonable time to
respond to a bid, can lead to the best result for the shareholders.
In the face of an
unsolicited bid, target companies must have the objective (and must persuade shareholders
that it is their objective) to deliver value for shareholders and not to entrench the board or
management. In the Allergan situation, eight months after the unsolicited bid was received,
Allergan announced a white knight transaction that nominally provided shareholders with
$66 billion rather than Valeant’s $54 billion final offer price.
Dismantling of defensive protections increases a company’s vulnerability to
In response to shareholder pressure for “good governance”, many
companies have voluntarily declassified boards, shortened or simplified advance notice
provisions, and otherwise dismantled defensive protections. In the Allergan situation, the
earlier declassification of the board made the company significantly more vulnerable to a
third party unsolicited bid. Allergan’s bylaw provisions—which gave the board broad