What Allergan Could Have Done Differently
From another thread:
Hi.
I don't read every thread, so it's probably best, if you want me to comment, to post to this thread (I get an email notification whenever someone posts there).
To the main question:
I'm not seeing this as the end, or even the start of the end. V+PS have finally reached first base, and have taken a lot longer, paid a vastly higher price, and arrived with much less momentum than planned. Home base, is still far away, and no one knows if it is within reach.
Two months ago, PS claimed that they are days away from submitting the Special Meeting request with over 40% of the shares. They have since been saying loudly that it's taking longer (and that the share count is lower) because the paperwork for the special meeting is so complicated (GET REAL! The meeting request came from a total of 35 shareholders, representing 31% of the shares. Excluding PS, that's 34 shareholders representing 21% of the shares, or about $300M worth of shares each. These are not some average widows and orphans shareholders, but large institutional investors with teams of staff lawyers each. If they want to, they can fill out forms quickly and correctly; even very complex forms -- and, besides, didn't PS read the Allergan Bylaws before they started this whole effort?). The fact that Ackman's own shares (which are subject to Insider Trading litigation) are required to reach the 25% count means that it will be very hard for him to convince the courts to let him hold the meeting before the Insider Trading issue is resolved -- which could take years.
Readers of this thread already know my view (see "When the company is doing well, management is in control, when not, investors are" post) that this merger won't happen because there is no value creation in the merger (at least not to Allergan's shareholders).
Readers of this thread also know my general description of "Soft Powers" (doctor letters, media barrage, investor presentations, politician involvement, regulators attention, lawsuits, and other actions that do not involve any changes to the company or it's capitalization) and "Hard Powers" (restructuring, borrowing, shares buyback, acquisitions, shares buyback, management buyout, etc.). Valeant never had much Soft Power to begin with (PS has a little bit of Soft Power -- being that Ackman is somewhat of a media personality, and PS is certainly a highly litigious hedge fund), and have used up every last ounce of Hard Power at their disposal to make this bid. Allergan, thus far, have managed to keep V+PS off balance almost entirely with Soft Power. It has made one Hard Power move (the restructuring), and is now in position to immediately make some major additional moves. (Technically, the LiRIS license deal is also a Hard Power move; but it is too small to make a dramatic difference by itself).
So, to answer the original question: What Allergan has been doing is more likely, in my view, to prevail than not to; so I wouldn't go around second-guessing.
Dan.