Maybe the soon-to-merge Valeant Pharmaceuticals and Biovail shouldn't have talked so openly about plans to lay off a big chunk of the combined workforce. On the eve of a shareholder vote to approve the deal, two California lawmakers and Biovail's outspoken founder are asking U.S. regulators to reconsider their approval.
California assemblymen Kevin de Leon and Jared Huffman separately asked the Securities and Exchange Commission and Department of Justice to probe the circumstances of the deal, even though the Federal Trade Commission has already given its OK. De Leon and Huffman are taking issue with a proposal to cut jobs and move the company's headquarters to Canada. Their rationale: California will lose tax revenues in the move, and the state stands to lose lots of jobs.
The two lawmakers also question how the same investment banks that provided "fairness opinions" for the merger can also be involved in Valeant's financing of the deal, the Wall Street Journal reports.
Meanwhile, Biovail founder Eugene Melnyk raises another legal question: Change of control payments earmarked for Biovail execs, including $25 million for CEO Bill Wells. The company itself agrees that there's technically no change of control as defined in the executives' severance agreements, the WSJ writes.
We'll have to see how the government responds today. But observers aren't too worried that regulators might disrupt the merger. "I don't think there's a chance this is not going to happen," Lazard analyst William Tanner tells Reuters.