William Ackman's Pershing Square Capital Management on Friday it filed a lawsuit against Allergan Inc (AGN.N) seeking confirmation that its request to hold a special meeting of Allergan shareholders would not trigger poison pill takeover defense.
Ackman and Valeant Pharmaceuticals International (VRX.TO) (VRX.N) are pursuing in a hostile takeover of Allergan.
Ackman, who owns nearly 10 percent of Allergan, has called for a shareholder meeting to elect new directors to the company's board. The suit seeks to confirm that Ackman is not about to trigger Allergan's poison pill takeover defense as it seeks shareholder support for the meeting.
Allergan, which makes Botox for wrinkles and other uses, has rejected a $53 billion joint offer from Ackman and Valeant. Ackman last week filed documents with the Securities and Exchange Commission that would start a proxy battle.
Allergan and Valeant both declined to comment on the suit.
Allergan adopted a one-year shareholder rights plan, often called a poison pill, on April 22, the day Valeant and Ackman made their offer. The company said it needed time to consider takeover proposals.
Allergan's pill will be triggered if a person or group acquires 10 percent or more of its shares. A poison pill aims to dilute a stock's value by flooding the market with more shares; this makes it pricier for a shareholder to get a controlling stake.
The lawsuit filed in Delaware Court of Chancery said it followed a request to Allergan from Pershing Square on June 6 seeking confirmation that Allergan would not use its poison pill to impede Ackman's request for a special meeting.
Allergan's bylaws require that a group calling a special meeting collectively represents 25 percent of shares outstanding. In the suit, Ackman says he is concerned that by calling the meeting, it will trigger the pill.
A response from Allergan’s counsel dated June 11 did not provide confirmation that it would not, the document said.
Allergan said in the letter to Pershing Square that its solicitation and receipt of proxies from other Allergan stockholders for the purpose of requesting a special meeting would not, in and of itself, trigger the pill.
Allergan declined to answer more specific questions about the details of Pershing Square's plan for soliciting those proxies in the absence of all the facts, according to a copy of the letter included in the lawsuit.
Allergan rejected a sweetened offer from Valeant and the activist investor on Tuesday.
Valeant shares traded in New York fell 0.3 percent to $120.40 while Allergan shares rose 0.6 percent to $162.97.