The Allergan Board Under Fire (A)

In 2014, the board of directors of Allergan Inc. received a surprise takeover offer from Valeant Pharmaceuticals in association with hedge fund activist Bill Ackmans Pershing Square Capital Management. In the unprecedented deal between a buyer and a hedge fund activist, Pershing Square had tacitly accumulated a 9.7% stake in Allergan prior to the Valeant offering, making Pershing Square the largest shareholder in Allergan. The case introduces students to many of the decisions that Allergan directors faced in light of the challenges facing Allergan’s leadership, management and business model. Specifically, Allergan’s board must decide whether to pursue a $ 10 billion acquisition of Salix Pharmaceuticals under the threat of a voting dispute and an extraordinary shareholders’ meeting to vote to replace Allergan’s boards with a list order more favorable to the Valeant merger. The proposed acquisition of Salix would open up a new therapeutic market for Allergan, but would also make Allergan too big for Valeant.

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