IRVINE, Calif.—In the continuing battle resulting from Valeant Pharmaceuticals International, Inc.’s (NYSE/TSX: VRX) attempted hostile takeover bid of Allergan, Inc., (NYSE: AGN) the U.S. District Court for the Central District of California ruled on Tuesday, Nov. 4, 2014, on Allergan’s federal securities litigation against Valeant, Pershing Square Capital Management, L.P., and its principal, William A. Ackman. The lawsuit alleged 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 in their attempts to takeover Allergan.

The court ordered that Allergan’s insider trading allegations were “persuasive,” that the defendants make corrective disclosures to previous statements and refrain from exercising any privileges from their ownership of Allergan stock until corrective disclosures are made.

The court found Allergan’s accusations that Valeant and Pershing Square had violated U.S. Securities and Exchange Commission (SEC) rules “persuasive” based on SEC Rule 14e-3, regarding “intentionally leaking information to institutional investors.” The court ruled on Allergan’s request to prevent the defendant, Pershing Square, “PS Fund 1, from exercising any of the privileges of ownership attaching to its 9.7 percent stake in Allergan, including voting or acting at the Dec. 18, 2014, Allergan shareholder meeting” and preliminarily preventing the defendants from “voting any proxies solicited by them” in violation of SEC rules “until corrective disclosures are made.” The court ordered that the defendants “must make corrective disclosures to their Sept. 24, 2014, proxy solicitation statement,” specifically disclosing “Pershing Square and Valeant’s Feb. 25 Relationship Agreement.”

In response to the court’s order, Allergan issued the following statement: "We are pleased that the Court ruled there are serious questions as to the merits of Allergan's insider trading case against Pershing Square and Valeant, and ordered them to revise their disclosures to reflect the truth behind their hostile acquisition plan. The Allergan Board of Directors is strongly committed to protecting the stockholder franchise and believes it is important that the rights of the Company's stockholders not be infringed by the actions of one hedge fund that significantly profited (to the detriment of other stockholders and the market) by trading in Allergan securities while in possession of material non-public information regarding Allergan. The Allergan Board has a duty to ensure that any stockholder voting on corporate matters acquired their shares in accordance with the law and will file an emergency appeal with the United States Court of Appeals for the Ninth Circuit asking them to bar Pershing Square from voting its illegally acquired shares at the Special Meeting."

Allergan has also invited physicians from around the world to sign a letter on the company website in support of the company’s “significant concerns about the consequences” resulting from Valeant’s attempted hostile acquisition of Allergan. There were 75 signatures as of press time.

Valeant, in response to the ruling, issued the following statement from its chairman and CEO, J. Michael Pearson, “Today's ruling is a victory for all Allergan shareholders as it puts the choice of Allergan's future in the hands of its owners. We look forward to the Dec. 18 special meeting, where we hope to move a large step closer to the compelling combination of Valeant and Allergan that will create an unrivaled platform for growth and value creation." The Valeant statement, issued the day of the court ruling, also said, “Today, the United States District Court for the Central District of California held that Pershing Square, Valeant and related parties may vote shares of Allergan or proxies at the upcoming Dec.18 stockholder meeting.”

Since the ruling, the defendants filed proposed corrective disclosures on Wednesday, Nov. 5, 2014. Valeant has also posted a page called “Advancing Allergan” on its website in support of the takeover.

Court documents highlighted the history of the attempted takeover bid as follows: “Valeant initially approached Allergan regarding a potential transaction between their companies in September 2012, but was rebuffed by Allergan’s CEO David Pyott and board of directors. . . . In February 2014, Canadian-based pharmaceutical company Valeant and hedge fund management company Pershing Square teamed up to help Valeant pursue a combination with Irvine-based pharmaceutical company Allergan.

”Between February and April, Pershing Square acquired 9.7 percent of Allergan’s shares. In June 2014, Valeant publicly announced a tender offer for Allergan shares after Allergan’s board of directors had rebuffed an unsolicited merger proposal. Valeant and Pershing Square then went directly to Allergan’s shareholders to urge them to call a special shareholder meeting to replace Allergan’s current directors with directors friendlier to Valeant. At the much-publicized urging of Pershing Square and some other shareholders, and after settling litigation in Delaware, Allergan agreed to hold a special shareholders meeting on Dec. 18, 2014.”