Skip to main content

Valeant Pharmaceuticals: Co-Purchasing and Injunctive Relief

Yesterday I discussed the history of Valeant Pharmaceuticals, and mentioned its unsuccessful effort to acquire Allergan.

Valeant never did acquire Allergan, but its effort made some fascinating law.

Some of the key questions arose from the fact that Valeant was acting in concert with a hedge fund manager, Pershing Square. So closely in concert, indeed, as to raise the question whether what was going on amounted to insider trading as SEC rules understand it? Pershing Square acquired a 9.7% stake in Allergan during the period of this collaboration, and it is was willing to vote those shares in favor of ousting the company directors that were resisting the takeover attempt.

Allergan responded with a lawsuit, asking that Pershing Square be enjoined from voting its shares giving the "likelihood" that this would be deemed to be insider trading.

Was there such a “likelihood” and would that have supported a preliminary injunction?

The U.S. District Court for the Central District of California court applied what is known as the Winter test for preliminary injunctions; named after a 2008 Supreme Court decision, Winter v. NRDC. The test involves four elements: a court will grant such an injunction if there is (1) a likelihood of success on the merits; (2) a likelihood of irreparable harm to the movant; (3) a balance of equities in favor of the movant; and (4) the interest of the public.

After working through each of those elements, the court granted the injunction “in part,” and in a way that allows each party to claim victory.

The take-away from all of that for merger arbs was (as I wrote for AllAboutAlpha at the time) that a co-purchasing tactic "in the lead-up to a tender offer may well be suspect in the eyes of many federal judges, and ought to be initiated if at all, only with that caution in the front of one's mind."

The photo above, by the way, is of William Ackman, the chief executive of Pershing Square Capital Management.


Popular posts from this blog

Great Chain of Being

One of the points that Lovejoy makes in the book of that title I mentioned last week is the importance, in the Neo-Platonist conceptions and in the later development of the "chain of being" metaphor, of what he calls the principle of plenitude. This is the underlying notion that everything that can exist must exist, that creation would not be possible at all were it to leave gaps.

The value of this idea for a certain type of theodicy is clear enough.

This caused theological difficulties when these ideas were absorbed into Christianity.  I'll quote a bit of what Lovejoy has to say about those difficulties:

"For that conception, when taken over into Christianity, had to be accommodated to very different principles, drawn from other sources, which forbade its literal interpretation; to carry it through to what seemed to be its necessary implications was to be sure of falling into one theological pitfall or another."

The big pitfalls were: determinism on the on…

A Story About Coleridge

This is a quote from a memoir by Dorothy Wordsworth, reflecting on a trip she took with two famous poets, her brother, William Wordsworth, and their similarly gifted companion, Samuel Taylor Coleridge.

We sat upon a bench, placed for the sake of one of these views, whence we looked down upon the waterfall, and over the open country ... A lady and gentleman, more expeditious tourists than ourselves, came to the spot; they left us at the seat, and we found them again at another station above the Falls. Coleridge, who is always good-natured enough to enter into conversation with anybody whom he meets in his way, began to talk with the gentleman, who observed that it was a majestic waterfall. Coleridge was delighted with the accuracy of the epithet, particularly as he had been settling in his own mind the precise meaning of the words grand, majestic, sublime, etc., and had discussed the subject with William at some length the day before. “Yes, sir,” says Coleridge, “it is a majestic wate…