The proceedings related to the proposed acquisition of Allergan (AGN) by Valeant Pharmaceuticals International (VRX) are getting murkier.
Allergan has now filed a lawsuit in the United States District Court for the Central District of California against Valeant, Pershing Square Capital Management, L.P. and its principal shareholder, activist investor Bill Ackman.
In its lawsuit, Allergan alleges that Valeant, Pershing Square and Ackman violated federal securities laws prohibiting insider trading, engaged in other fraudulent practices, and failed to disclose legally required information.
We note that Valeant has been relentlessly pursuing Allergan since Apr 2014. On Jun 18, 2014, Valeant announced that it has commenced an exchange offer for the common stock of Allergan, Inc. after the latter rejected its previous offer a couple of times.
Allergan cited that Valeant’s offer substantially undervalues the company, creates significant risks and uncertainties for the stockholders of Allergan, and is not in the best interests of the company and its shareholders.
We note that the tender offer was scheduled to expire on Aug 15, 2014. Pershing Square is expected to hold a special meeting for shareholders in Aug 2014. In response to Allergan’s lawsuit, Valeant and Pershing Square Capital Management announced that Allergan’s claims were baseless. Both Valeant and Pershing Square Capital Management believe that the lawsuit is a desperate attempt by Allergan to delay or avoid the special meeting.
Allergan currently carries a Zacks Rank #1 (Strong Buy) while Valeant currently has a Zacks Rank #4 (Sell). We expect investor focus to remain on further updates from the transaction.
Some better-ranked stocks in the healthcare sector include AstraZeneca (AZN) and Salix Pharmaceuticals (SLXP). Both carry a Zacks Rank #1 (Strong Buy).
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