Valeant, Pershing Square: Bring on the SEC insider trading probe

Go ahead and investigate Valeant ($VRX) and Pershing Square Capital Management, the drugmaker's deal partner in its $54 billion hostile bid for Allergan ($AGN), the pair said Thursday in response to a reported SEC probe over insider trading. According to them, they've got nothing to hide.

Federal regulators are taking a look into whether that bid violates securities laws, sources told The Wall Street Journal. But the probe is still in its early stages and may not lead to any enforcement action--and the takeover team is confident it won't.

"At the time of the merger proposal to Allergan on April 22, neither Valeant nor Pershing Square had taken any steps whatsoever regarding a tender offer," a Pershing Square representative told the WSJ. "There is nothing illegal, unethical or improper in taking a toehold position before a merger is proposed, even if it is not wanted by the target's management. We welcome the SEC's review of the facts."

A Valeant spokeswoman told Bloomberg the company has "no concerns" about the legality of its actions.

Allergan itself first alleged insider trading earlier this month, filing a complaint that claimed Pershing Square manager Bill Ackman had colluded with the Canadian pharma to pick up shares as it was preparing its tender offer.

The way the Botox maker sees it, Ackman did 97% of the buying--grabbing 25.4 million Allergan shares for $3.22 billion--all the while "strenuously maintaining the fiction that the purchases were by Valeant," it said in its complaint. And the value of those shares rose 15% after Valeant announced its merger proposal--an on-paper gain for Ackman worth about $1 billion.

But Valeant accused Allergan of crying "insider trading" in hopes of delaying the special meeting that its predators are attempting to force. There, they're hoping they can overturn Allergan's board, instate a slate of directors that's more amenable to their bid, and strike their target's poison pill takeover defense.

Whether or not that's the effect Allergan's going for, it could just be a consequence of the litigation. "Although Allergan is seeking an expedited review, we do not think it is likely to be resolved until 2015," BMO Capital Markets analyst David Maris wrote in a recent note to clients.

- get more from The Wall Street Journal (sub. req.)
- see Bloomberg's take

Special Reports: Pharma's top 10 M&A deals of 2013 - Valeant/Bausch + Lomb | The most influential people in biopharma today - J. Michael Pearson - Valeant | 20 Highest-Paid Biopharma CEOs of 2012 - David Pyott - Allergan