Allergan Oct. 28, 2014 v2 - Certified

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MARIA BEESLEY, OFFICIAL REPORTER, CSR, RMR

SACV 14- 1214- DOC - 10/ 28/ 2014 - VOL. I I
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
HONORABLE DAVID O. CARTER, JUDGE PRESIDING
CERTIFIED TRANSCRIPT
- - - - - - -
ALLERGAN I NC. , ET AL, , )
)
Pl ai nt i f f ( s) , )
)
vs. ) No. SACV 14- 1214- DOC
) VOL. I I
VALEANT PHARMACEUTI CALS )
I NTERNATI ONAL I NC. , ET AL, , )
)
Def endant ( s) . )
_________________________________)

REPORTER' S TRANSCRI PT OF PROCEEDI NGS
PRELI MI NARY I NJ UNCTI ON
SANTA ANA, CALI FORNI A
TUESDAY, OCTOBER 28, 2014

MARI A BEESLEY, CSR, RMR
Of f i ci al Feder al Repor t er
Ronal d Reagan Feder al Bui l di ng, Room1- 053
411 West 4t h St r eet
Sant a Ana, Cal i f or ni a 92701
( 714) 564- 9259
amar i a1957@yahoo. com
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APPEARANCES OF COUNSEL:
FOR THE PLAI NTI FF( S) : LATHAM & WATKI NS
BY: PETER WALD, ESQ.
505 MONTGOMERY STREET
SUI TE 2000
SAN FRANCI SCO, CALI FORNI A 94111
( 415) 391- 0600

LATHAM & WATKI NS
BY: MI CHELE J OHNSON, AAL
650 TOWN CENTER DRI VE
20TH FLOOR
COSTA MESA, CALI FORNI A 92626
( 714) 540- 1235

FOR THE PLAI NTI FF( S) : WACHTELL LI PTON ROSEN & KATZ
BY: WI LLI AM SAVI TT, ESQ.
51 WEST 52ND STREET
NEWYORK, NEWYORK 10019
( 212) 403- 2329

FOR THE DEFENDANT( S) VALEANT PHARMACEUTI CALS:
SULLI VAN & CROMWELL
BY: BRI AN FRAWLEY, ESQ.
and J OHN HARDI MAN, ESQ.
125 BROAD STREET
NEWYORK, NEWYORK 10004
( 212) 558- 4983

SULLI VAN & CROMWELL
BY: EDWARD J OHNSON, ESQ.
1888 CENTURY PARK EAST
21ST FLOOR
LOS ANGELES, CALI FORNI A 90067
( 310) 712- 6640

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SACV 14- 1214- DOC - 10/ 28/ 2014 - VOL. I I
FOR THE DEFENDANT( S) PERSHI NG SQUARE:
KI RKLAND & ELLI S
BY: MARK HOLSCHER, ESQ.
and MI CHAEL SHI PLEY, ESQ.
AUSTI N NORRI S, ESQ.
333 SOUTH HOPE STREET
LOS ANGELES, CALI FORNI A 90071
( 213) 680- 8190

Al so Pr esent f or Pl ai nt i f f s: Doug I ngr am, Kar ah Par schauer ,
Ar ni e Pi nkst on, Mat t Mol eda, Gavi n Her ber t ,

Al so Pr esent f or Def endant s: Mi chael Pear son, Howar d Schi l l er ,
Rober t Shyon, Wi l l i amAckman, Davi d Schl ai f er

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SACV 14- 1214- DOC - 10/ 28/ 2014 - VOL. I I
SANTA ANA, CALIFORNIA, TUESDAY, OCTOBER 28, 2014
VOL. II
( 12: 04)
THE COURT: Back on t he r ecor d. Al l counsel ar e
pr esent , t he par t i es ar e pr esent .
Counsel on behal f of t he def endant s, I cer t ai nl y know
who you ar e, but f or t he r ecor d, pl ease.
MR. HOLSCHER: Good af t er noon, Your Honor . Mar k
Hol scher f or Per shi ng Squar e.
Your Honor hear d 45 mi nut es of l egal ar gument f r om
Al l er gan' s counsel as t o why t he SEC woul d t hi nk a co- bi dder i s
not a co- of f er or and not an of f er i ng per son. We went back, I
t hi nk, t o J udge Fr i endl y, a number of bul l et i ns, Your Honor . But
t he one t hi ng Al l er gan' s counsel di dn' t do, Your Honor , i s show
you what t he SEC sai d and di d her e.
I have pl aced bef or e you a document , Your Honor . Thi s
i s Exhi bi t 37 t o our opposi t i on. Thi s i s t he SEC' s comment s - -
THE COURT: J ust a moment . Let me f i nd t hat document .
You say i t ' s been pl aced bef or e me, but hol d on. Counsel , I want
you t o see what I have got and t hen di r ect me t o wher e you want me
t o go, j ust t o be cer t ai n.
MR. HOLSCHER: Your Honor , you ar e st eal i ng my dr amat i c
t hunder her e.
THE COURT: I t was ver y dr amat i c. Want t o st ar t al l
over agai n?
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( LAUGHTER)
MR. HOLSCHER: Why di dn' t t hey show you t he document ,
Your Honor ? Thi s i s t he document f or t he t ender of f er at i ssue.
And what does t he SEC do, Your Honor ? They pr ovi de comment s. And
what do t he comment s f r omt he SEC say? You don' t have t o guess,
Your Honor . You don' t have t o specul at e. You don' t have t o r ead
30- year - ol d bul l et i ns. " Pl ease r evi se t he cover page t o i dent i f y
Per shi ng Squar e Capi t al Management as a co- bi dder i n t he t ender
of f er . "
Your Honor , our cl i ent s - - i f we go now t o 31 - - i n t he
t ender of f er Per shi ng Squar e i s l i st ed as an of f er i ng per son
pur suant t o t he i nst r uct i ons of t he SEC. Why ar e we her e? As an
of f er i ng per son, t hei r ent i r e case f ai l s. Why do you get
mount ai ns of pages of ar gument and not be shown t he oper at i ve
document s? Why, Your Honor ? Because Al l er gan admi t t ed t o t he SEC
i n dozens of communi cat i ons t r yi ng t o get us i nvest i gat ed f or
ot her i ssues, t hey r ef er r ed t o us as co- bi dder s and co- of f er or s.
So t hey have t o make up t he di st i nct i on, Your Honor .
A co- of f er or i s di f f er ent t han a co- bi dder whi ch i s
di f f er ent t han an of f er i ng per son. Your Honor , we' r e on t he
of f er i ng document . The SEC i nst r uct ed i t . Thi s case i s over .
I f I coul d have you put up 29.
I f t hat ' s not enough, Your Honor , why ar e we an of f er i ng
per son? Per shi ng Squar e i s j oi nt l y and sever al l y l i abl e f or t he
ent i r e t ender of f er consi der at i on. Fi nanci ng, anyt hi ng happens,
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we' r e j oi nt l y and sever al l y l i abl e. Al l er gan' s counsel says,
wel l , t hat ' s no bi g deal . You have got a guar ant ee. I t hought
t hey sai d Val eant was a house of car ds, Your Honor . They' r e goi ng
t o need t o choose.
As par t of our of f er i ng, we' r e onl y t al ki ng Val eant
shar es. We f r eed up $2 bi l l i on of cash vi a Al l er gan shar ehol der s.
We al so agr eed t o accept a l ower exchange r at e and pr ovi de
$400 mi l l i on of f i nanci ng.
Your Honor , t hi s case i s over wher e t he of f er i ng per son,
at t he i nst r uct i on of t he SEC whi ch sai d, as a co- bi dder l i st
your sel f as an of f er or , and we' r e on t he page. I t i s a bi t cr azy,
Your Honor . Our cl i ent s ar e i n cour t accused of i nsi der t r adi ng;
f or not bei ng of f er er s on a document t hey' r e l i st ed as t he
of f er or s at t he i nst r uct i on of t he SEC.
Your Honor , i t get s even mor e Or wel l i an. Al l er gan says,
we t ook subst ant i al st eps t owar ds a t ender of f er because we si gned
an agr eement whi ch says we coul dn' t t ake subst ant i al st eps and
woul dn' t . The r el at i onshi p agr eement pr ecl uded i t .
They go one st ep f ur t her , Your Honor . Di d you hear t he
wor d " Sanf or d Ber nst ei n" ? I di dn' t hear t he wor d " Sanf or d
Ber nst ei n" i n an hour and a hal f . The semi nal event her e, Your
Honor , i s May 28, May 29, t he Sanf or d Ber nst ei n conf er ence.
Sanf or d Ber nst ei n conf er ence: I nvest or s say separ at el y t o Val eant
and Per shi ng Squar e show commi t ment , change, show commi t ment wi t h
a symbol i c t ender of f er . "
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Your Honor , I have on t he scr een a br i ef summar y and my
col l eague i s goi ng t o go t hr ough al l of t he l aw and al l of t he
f act s i n det ai l . Si x wi t nesses wi t h swor n t est i mony. Val eant ,
Per shi ng Squar e, RBS, Bar cl ays. Four di f f er ent i nst i t ut i ons. Al l
of t hei r document s i ndi cat e t hey wer e bar r ed f r omseeki ng a t ender
of f er . A change was made and i n J une i s when t he st eps st ar t ed t o
get t he f i nanci ng.
Al l er gan' s counsel i s pol i t e, Your Honor , and he i s
r espect f ul , but he i s br azen. He i s t el l i ng you t hat i n a
pr el i mi nar y i nj unct i on, you have t o di sr egar d t he swor n t est i mony
of si x wi t nesses who di r ect l y cont r adi ct hi s specul at i on and
di r ect l y cont r adi ct hi s i nf er ences. Agai n, why di dn' t you hear
t he wor d " Sanf or d Ber nst ei n" ?
On i r r epar abl e har m, Your Honor , what we' r e t ol d i s t he
egg i s goi ng t o be scr ambl ed. So i f we vot e on December 18, i f
t he vot e passes, i f new di r ect or s ar e appoi nt ed, i f t hose new
di r ect or s accept t he Val eant / Per shi ng Squar e of f er , and i f t hose
new di r ect or s vi ol at e t hei r f i duci ar y dut i es i n accept i ng t hat
of f er , t hen i f Al l er gan' s shar ehol der s vot e t o appr ove what t he
new di r ect or s i n vi ol at i on of f i duci ar y dut y have r ecommended, t he
eggs ar en' t scr ambl ed, Your Honor . We haven' t bought t he eggs.
We' r e bar el y l ooki ng at t he chi cken.
What we have her e, Your Honor , i s not an at t empt when
t hey say t o keep t he st at us quo. Thi s i s a mandat or y i nj unct i on
t o st op us f r omvot i ng our shar es we have an absol ut e r i ght t o
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vot e.
Per shi ng Squar e and Val eant had a val ue unl ocki ng i dea.
Take a good company and make i t gr eat . For year s anal yst s and
i nvest or s had asked Al l er gan, r educe t he bl oat . Reduce some of
t he wast ef ul spendi ng. They di dn' t do i t .
Val eant , Your Honor , has a pl at f or mt hat i s an
i nt er nat i onal pl at f or mt o di st r i but e dr ugs ar ound t he wor l d.
Al l er gan' s own anal yst s have sai d t her e i s $2 bi l l i on of syner gi es
at t he t r ansact i on. They come f or war d wi t h t hi s pr oposal t o
unl ock shar ehol der val ue. Your Honor , si nce t hat pr oposal was
announced, t he shar ehol der val ue f or Al l er gan has i ncr eased f r om
35 bi l l i on t o 54 bi l l i on.
Your Honor , di d you not i ce i n t he pr el i mi nar y i nj unct i on
f i l i ngs t her e i s not a si ngl e decl ar at i on f r oma si ngl e
shar ehol der ? Al l er gan says i t ' s t r yi ng t o t ake car e of t he
l ong- t er mshar ehol der s. That ' s t hei r concer n. That ' s why t hey
haven' t spoken t o anyone f r omVal eant or Per shi ng Squar e i n
mont hs. That ' s why t hey wer e f i ght i ng wi t h t he most oner ous
byl aws i n t he Uni t ed St at es t o pr event a vot e.
Your Honor , wher e i s a si ngl e shar ehol der sayi ng t hey
don' t want Per shi ng Squar e t o vot e? Ther e i s not a shar ehol der
wi t h an at t ached decl ar at i on because i t doesn' t exi st .
Al l er gan' s counsel ' s pol i t e ar gument r ef er r ed t o my
cl i ent as an i nsi der t r ader about 50 t i mes. I know Your Honor had
some of your pr obat i oner s her e t hi s mor ni ng f or an hour . I can
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t el l you t hat al l egat i ons t hat someone engaged i n i nsi der t r adi ng
ar e awf ul l y ser i ous and shoul d be backed up wi t h wi t nesses and
document s, and t hey' r e not .
What i s t he i nsi de i nf or mat i on, Your Honor ? Our own
val ue unl ocki ng pr oposal s t o t he shar ehol der s. Your Honor i s used
t o seei ng i nsi der t r adi ng cases. Someone has i nsi de i nf or mat i on
f r omt he company t hat t hey mi suse t o unf ai r advant age. Our i nsi de
i nf or mat i on i s our own pl an, our own shar ehol der unl ocki ng i dea
f or whi ch Per shi ng Squar e i s l i st ed as t he of f er or . I t i s a
r adi cal r ewr i t e of t he secur i t i es l aw t hat Al l er gan seeks.
I f I coul d go t o Sl i de 1.
Al l er gan has ei ght di f f er ent hur dl es t o t r y and obt ai n a
pr el i mi nar y i nj unct i on. They must pr ove i r r epar abl y har med. They
must pr ove t hat pr event i ng us f r omvot i ng woul d ser ve t he publ i c
i nt er est . They must make some showi ng t hat enj oi ni ng us f r om
vot i ng woul d pr event mor e har mt han i t woul d cause i n t he
bal anci ng. They must pr ove t hey got st andi ng t o br i ng t hi s cl ai m.
Your Honor , we di dn' t buy any st ock f r omt hem. They
di dn' t sel l any st ock at t he t i me.
By t he way, Your Honor , t hey keep sayi ng, wel l , i f we
can' t get an i nj unct i on, who can. Your Honor , i t ' s t he same
agency t hat sent us t he document sayi ng we wer e a co- bi dder and
havi ng us add t o t he T. O. we' r e an of f er or .
Al l er gan must pr ove t hat Val eant and Per shi ng Squar e
t ook subst ant i al st eps t owar d a t ender of f er and t hey must pr ove
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t hey' r e not co- of f er or s.
My col l eague Mr . Fr awl ey wi l l go i nt o al l t hose ar eas i n
det ai l and r ef ut e t he i nf or mat i on pr ovi ded by Al l er gan' s counsel .
And Al l er gan must pr ove t hat despi t e i t s many publ i c di scl osur es
si nce Apr i l 22, shar ehol der s l ack t he necessar y i nf or mat i on t o
vot e, and t hey must show t hey don' t have uncl ean hands, Your
Honor .
Your Honor , i t ' s not l awyer s' ar gument s about
i r r epar abl e har m. I t ' s not a gi f t ed counsel spi nni ng a
hypot het i cal . I t ' s how woul d Al l er gan be har med i f PS Fund 1
vot es on December 18.
Your Honor , I asked Al l er gan' s l ead di r ect or a si mpl e
quest i on: How woul d Al l er gan be har med - - f or get i r r epar abl e - -
how woul d Al l er gan be har med i f Per shi ng, PS Fund 1 vot es on
December 18?
I f you coul d pl ay t he t ape.
( Vi deot ape pl ayed. )
MR. HOLSCHER: I n f act , Your Honor , Al l er gan' s l ead
di r ect or i s wr ong. I f we put t he sl i de up, Al l er gan' s byl aws
expr essl y per mi t t hat ever y shar ehol der get s t o vot e.
Uncondi t i onal .
He got conf used, Your Honor . What Chancel l or Bouchar d
r ef er r ed t o i s t he hor se- choki ng byl aws t o t r y and pr event t he
speci al meet i ng, j ust t o cal l i t t he hor se choker s. To cal l a
speci al meet i ng t hey put somet hi ng i n t hey coul d r ej ect i f t hey
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accuse you of i nsi der t r adi ng. But t o vot e, t her e i s zer o
r est r i ct i on. So not onl y i s t her e no i r r epar abl e har m, but hi s
f al l - back ar gument on " I ' mj ust f ol l owi ng t he byl aws, " i t ' s wr ong.
I n f act , Your Honor , i f we go t o t he sl i de, Chancel l or
Bouchar d or der ed t he speci al meet i ng. That ' s t he hor se- choker
byl aw r ef er ence. Chancel l or Bouchar d or der ed t he meet i ng t o go
f or war d on December 18.
Your Honor , when you assess Al l er gan' s ar gument t hat
i t ' s goi ng t o suf f er i r r epar abl e har m, pl ease keep i n mi nd what
Al l er gan' s counsel ar gued at t hi s podi umon August 20. What he
sai d t o you was, " J udge, you need t o qui ckl y deci de whet her
Per shi ng Squar e i s an i nsi der t r ader because, Your Honor , we need
t o deci de whet her t o have t he speci al meet i ng. And j udge, we' r e
goi ng t o be i r r epar abl y har med i f you don' t make t hat deci si on
because we' l l t hen be havi ng an i l l egi t i mat e meet i ng. "
The same st uf f about skewi ng t he bal ance, not
appr opr i at e, shoul dn' t have t he meet i ng, t hat ' s what t hey t ol d you
t he l ast t i me. Wel l , l ook what happened, Your Honor . Af t er
Chancel l or Bouchar d cr i t i ci zed t hei r hor se- choki ng byl aws, t hey
st i pul at ed t o have t he meet i ng. That was t he l ast t i me t hey t ol d
you t hey suf f er ed i r r epar abl e har m. They t hen st i pul at ed t o i t .
I f we coul d go t o Sl i de 10.
Your Honor , Al l er gan' s counsel di scussed one of t he
pr oposal s f or t he speci al meet i ng, whi ch was t he vot e t o r epl ace
di r ect or s. That ' s i t . So December 18, t hat vot e, t her e i s no
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case whi ch says a shar ehol der vot e t o r epl ace di r ect or s coul d i n
any way cause i r r epar abl e har mt o a company, Your Honor .
The ot her pr oposal s ar e r equest s. Pl ease consi der
t al ki ng t o Val eant . The ot her i s, we have an al t er nat e sl at e of
di r ect or s we pr opose, but Al l er gan doesn' t have t o accept t hat
sl at e.
Your Honor , af t er t hat vot e on December 18, i f we vot e,
i f we wi n - - and by t he way, Your Honor , i f we' r e goi ng t o pass
t hemmor e t han 60 per cent , t hen t hey woul d have won anyway, r i ght ?
I t ' s pur e specul at i on what ' s goi ng t o happen wi t h t hi s vot e. I f
we wi n and t hose si x di r ect or s ar e r emoved, i n t he f i r st i nst ance
Al l er gan get s t o t r y t o appoi nt t hose si x di r ect or s. And t he
sl at e we have pr oposed, Your Honor , t hey al l admi t t ed i n t hei r
deposi t i on t est i mony t hey don' t know anyt hi ng bad about t hem.
They' r e i ndependent . No pr i or r el at i onshi p wi t h our cl i ent .
No evi dence what soever t he new di r ect or s woul d not be
f i duci ar i es. Wher e ar e t he decl ar at i ons? Wher e i s t he t est i mony
of i r r epar abl e har m? Not gi f t ed l awyer s' ar gument s. Not a
sni ppet f r oma pai d exper t . Wher e i s i t ? Your Honor knows t he
f i r st t hi ng you l ook at when someone seeks a pr el i mi nar y
i nj unct i on, t he f i r st t hi ng you l ook at i s, i s t her e i r r epar abl e
har mt oday.
Your Honor , I ' d ask you t o t hi nk about somet hi ng. Have
you ever had a par t y come i n and say " I ' mi r r epar abl y har med
t oday, " but t hey want t o del ay t he hear i ng? And t he par t y t hat ' s
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supposed t o have commi t t ed t he har mkeeps sayi ng, " J udge, l et ' s go
ear l i er . Let ' s do i t now. "
I f you t hi nk you' r e i r r epar abl y har med, i t ' s l i ke t he
f i r e al ar m, r i ght ? Except you' r e comi ng i n. Why di dn' t t hey f i l e
Apr i l , May, J une, J ul y, August , Sept ember ? Why di dn' t we get a
pr el i mi nar y i nj unct i on mot i on unt i l Oct ober 6? You know what t hey
sai d t o you, Your Honor . " We don' t have t he evi dence t o seek a
pr el i mi nar y i nj unct i on. We need di scover y. We don' t have t he
evi dence. " Then we want ed t he hear i ng ear l i er , because whi l e t hi s
i s out st andi ng, Your Honor , i t hover s over t he Val eant / Per shi ng
Squar e of f er i ng. Have you ever been i nvol ved i n a case wher e t he
par t y seeki ng a pr el i mi nar y i nj unct i on i s t he par t y who want s mor e
t i me bef or e you deci de?
Al l er gan' s f al l - back ar gument , Your Honor , t hi s deep
concer n f or shar ehol der s - - and I ' mgoi ng t o get t o t hat - - i s,
j udge, you need t o f i nd a di scl osur e vi ol at i on her e. Per shi ng
Squar e needs t o t el l t he wor l d t hey have engaged i n i nsi der
t r adi ng. They need t o make sur e t he wor l d knows, because t hen
t hese shar ehol der s, t hey' l l have t he i nf or mat i on t hey need t o
vot e. And of cour se, Your Honor , t he Wi l l i ams Act i s sol el y
f ocused on gi vi ng i nf or mat i on t o shar ehol der s t o vot e.
Her e i s t he pr obl em, Your Honor . I n t hei r openi ng br i ef
on Oct ober 6, Al l er gan' s l awyer s ar gued you' ve got t o r equi r e
Per shi ng Squar e t o di scl ose t hei r i nsi der t r adi ng t o make sur e t he
shar ehol der s know. That ' s why we need di scl osur e.
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Wel l , I deposed t hei r CEO a coupl e days l at er , and l et ' s
hear what he sai d about Al l er gan' s ar gument t hat i nvest or s need t o
be i nf or med about t hi s i nsi der t r adi ng.
MR. HOLSCHER: Wel l , Your Honor , I t hi nk Al l er gan' s CEO
j ust spoke t o t he i r r epar abl e har mcl ai mt hat shar ehol der s need t o
be educat ed her e.
I f we can put up Sl i de 11.
Your Honor , t hi s sl i de al one r equi r es t he cour t t o deny
any di scl osur es on t he Wi l l i ams Act . The unsol i ci t ed of f er was i n
about Apr i l 22, Your Honor . The t ender of f er , mi ddl e of J une.
Si nce t he t i me of t he Per shi ng Squar e/ Val eant ar gument , Al l er gan
has made 76 SEC f i l i ngs expl ai ni ng why shar ehol der s shoul d not
vot e. Fi r st not f avor t he vot e i n December ; and second, at t he
vot e, vot e agai nst us.
And you see t hose 13 r ed f l ags, Your Honor ? That ' s 13
t i mes Al l er gan has accused us of bei ng an i nsi der t r ader .
Mr . Pyot t i s r i ght . You' d have t o l i ve under a r ock not t o know
what t hey have accused us of .
Your Honor , I have i n f r ont of me her e, Your Honor , 1500
pages of di scl osur e. I t ' s a pr et t y bi g st ack. These ar e t he
di scl osur es Al l er gan has made, most l y at t acki ng us, si nce J une.
Do you r eal l y t hi nk Al l er gan i s her e pr i mar i l y seeki ng an
addi t i onal di scl osur e?
Your Honor , we al so di scl osed t he l i t i gat i on. We 12: 30
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di scl osed t hei r al l egat i ons, l i nked t he copy of t hei r compl ai nt
f or t he shar ehol der s. The shar ehol der s know exact l y what t hey
have accused us of doi ng. Pr et t y ser i ous accusat i ons. I bel i eve
f al se accusat i ons. But ever ybody knows.
I f we coul d put up Sl i de 12.
Thi s i s t he one Supr eme Cour t case Al l er gan' s counsel
di d not di scuss, Your Honor . Thi s i s t he semi nal case, t he
Supr eme Cour t on t he Wi l l i ams Act . " Congr ess di scl ai med any
i nt ent i on t o pr ovi de a weapon f or management t o di scour age
t akeover bi ds and expr essl y embr aced a pol i cy of neut r al i t y. "
The Wi l l i ams Act i s not supposed t o be mi sused by
ent r enched management t o st op act i vi st shar ehol der s. That ' s t he
Uni t ed St at es Supr eme Cour t , Your Honor . I t ' s not di st r i ct cour t
cases f r omout of ci r cui t . That ' s t he Uni t ed St at es Supr eme
Cour t .
I submi t t o you, Your Honor , when you f i ni sh hear i ng al l
of t hi s evi dence, you wi l l have no doubt t hat Al l er gan and i t s
management want t o use t hi s case t o di scour age a t akeover bi d.
They have sai d as much. Even t hough t he vot e on December 18 i s
not a change of cont r ol , t hey want you t o use t he Wi l l i ams Act
t oday t o ni p i n t he bud a pot ent i al t akeover mont hs down t he r oad.
That i s exact l y what t he Wi l l i ams Act i s not supposed t o be used
f or .
What i s t he Wi l l i ams Act f or , Your Honor ? I t ' s
di scl osur e t o shar ehol der s t o have i nf or mat i on t o vot e. I t hi nk,
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Your Honor , t he shar ehol der s her e mi ght pr ef er t hat Al l er gan j ust
l ay of f t he di scl osur es f or a whi l e. 76 i s enough.
Let ' s t al k about t he publ i c i nt er est , Your Honor .
Al l er gan says t hey' r e her e t o def end t he shar ehol der s. They have
spent t he l ast sever al mont hs canvassi ng al l t hei r shar ehol der s,
t al ki ng t o t hem, t r yi ng t o get l et t er s, t r yi ng t o get suppor t .
Why i sn' t t her e a si ngl e shar ehol der who has f i l ed a decl ar at i on
sayi ng we shoul dn' t vot e? These ar e t he l eadi ng i nvest ment f unds
i n t he wor l d. They' r e f ul l y awar e t hi s hear i ng i s goi ng f or war d.
Why hasn' t anyone come f or war d? Because r emember , t hi s
i s f or t he shar ehol der s. By t he way, t hey' r e champi ons of t he
shar ehol der s who t hey have t r i ed t o never have a speci al meet i ng
wi t h t he most oner ous byl aws i n t he Uni t ed St at es, but t hey' r e
her e t oday f or t he shar ehol der s.
Wel l , you know why t her e i s no decl ar at i on, Your Honor ?
Because no shar ehol der has suppor t ed i t . And t hei r own CEO has
admi t t ed i t .
I f you coul d pl ease pl ay t he t ape.
MR. HOLSCHER: Your Honor , t he publ i c i nt er est of
shar ehol der s, as a gener al mat t er t her e ar e shar ehol der advi sor y
gr oups t hat l ook af t er whet her boar ds ar e behavi ng pr oper l y and
pr oper l y r espect i ng shar ehol der r i ght s. I SS, t he l eadi ng ser vi ce,
t hey embody t he publ i c i nt er est . They' r e t he r ef er ee. I s t he
boar d bei ng coer ci ve, r esponsi ve or unf ai r ?
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You di dn' t hear one wor d about t he I SS and how t hey
r ef l ect what t he publ i c i nt er est i s. What di d t he l eadi ng
shar ehol der advi sor y ser vi ce say about Al l er gan' s at t empt s t o
pr event t he shar ehol der s f r omvot i ng on our pr oposal s? I ' mgoi ng
t o t ake you t hr ough a coupl e document s t o show you Al l er gan' s
r el at i onshi p wi t h t he I SS. I submi t , Your Honor , i t ' s t el l i ng.
Anyone who di sagr ees wi t h t hem, t hey' r e goi ng t o seek t o har m. I
don' t say t hat l i ght l y. They' r e goi ng seek t o di scr edi t .
Let ' s f i r st st ar t wi t h Sl i de 15. The CEO and t he
chai r man of t he boar d of Al l er gan meet wi t h I SS. I t ' s an
opt i mi st i c st ar t , Your Honor . We want t o est abl i sh a
r el at i onshi p. We want an ongoi ng di al ogue. What t hey di d, Your
Honor , i s t hey at t ached a memo whi ch sai d our byl aws ar e no
di f f er ent t han any ot her compani es. These ar e vani l l a byl aws.
By t he way, Your Honor , f our of t hese ar e vot ed on
December 18. J ust so we t i e t he t hr ead, t hese, what Bouchar d has
cal l ed t he hor se- choker , t hese ar e t he ones t hey' r e t r yi ng t o
def end her e.
So what happens? They meet wi t h t hem. They make t he
submi ssi on. What does I SS do, t he neut r al t hi r d par t y?
I f we go t o t he next sl i de, pl ease.
I SS, af t er r evi ewi ng al l t hei r i nf or mat i on, says, you
know, we act ual l y di sagr ee wi t h you. We t hi nk t he shar ehol der s
shoul d cal l t he speci al meet i ng.
Go t o t he next sl i de. 12: 37
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I SS t hen det er mi nes t hat Al l er gan' s ant i - shar ehol der
boar d pr act i ces ar e t he wor st i n t he count r y. Your Honor , i t ' s a
scal e of 1 t o 10, and 10 i s bad and a r ed f l ag i s awf ul . For
t hei r boar d pr act i ces, i t ' s a 10 wi t h a r ed f l ag. Wi t h r espect t o
shar ehol der r i ght s, i t ' s a f l ag wi t h a ni ne.
I SS goes on t o poi nt out , Your Honor - - and I won' t go
t hr ough t he whol e document - - t hat t he i nf or mat i on Al l er gan
pr ovi ded t o t hemt hat t hei r byl aws wer e si mi l ar t o ot her compani es
was not t r ue.
I SS goes on t o not e t hat t he scor ched ear t h t act i cs t hat
Al l er gan i s empl oyi ng agai nst Val eant and Per shi ng Squar e don' t
r i ng t r ue because Al l er gan i s t hen t r yi ng t o i mpl ement what
Val eant and Per shi ng Squar e ar e aski ng t hemt o do. Val eant and
Per shi ng Squar e say you have t he hi ghest over head i n al l phar ma.
Your CEO get s a bonus based on how much money you spend on R&D
even t hough not hi ng comes f r omi t .
And what I SS not es i s, why ar e you so af r ai d of a
shar ehol der vot e? Why ar e you at t acki ng t hese peopl e? I SS t hen
goes on t o say t hat at t he vot e shar ehol der s may wi sh t o f ur t her
avai l t hemsel ves of t he oppor t uni t y once t he meet i ng i s f i nal l y
cal l ed t o addr ess t he r oot causes of t hese gover nance concer ns.
That ' s t he publ i c i nt er est , Your Honor . These byl aws,
t hese t hi ngs t hey' r e vot i ng on December 18, t hat ' s what I SS i s
sayi ng ar e t he wor st byl aws i n t he count r y.
By t he way, Your Honor , t hat ' s why 35 per cent of t hese 12: 39
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shar ehol der s have al r eady f i l l ed out paper wor k t hat ' s equi val ent
t o changi ng t he deed on your house t o vot e and pages of quest i ons
as t o your pr i or t r adi ng act i vi t y.
Your Honor , when you have 35 per cent of t he shar ehol der s
essent i al l y f i l l i ng out massi ve i nt r usi ve paper wor k and t he I SS
sayi ng you shar ehol der s shoul d act ual l y consi der vot i ng f or t hese
pr oposal s because of gover nance pr obl ems, t hat ' s t he publ i c
i nt er est we' r e ser vi ng.
I t get s wor se, Your Honor . Af t er I SS i ssues i t s r epor t ,
t hat ' s when Al l er gan st ar t s t aki ng st eps t o consi der buyi ng
anot her company wi t h cash so t he shar ehol der s don' t get a vot e.
You r emember t her e was a di scussi on about l ong- t er mshar ehol der s?
I ' mgoi ng t o t al k t o you f or a second about l ong- t er m
shar ehol der s, Your Honor .
So what happens? I n Oct ober t hey' r e doi ng ever yt hi ng
t hey can t o f i ght t hi s pr oposal . By t he way, we' r e goi ng t o get
t o t hi s. They' r e f i duci ar i es. They' r e supposed t o consi der t hi s
of f er t hat ' s cr eat ed $19 bi l l i on i n val ue.
So what does I SS say? They say t hat what Al l er gan i s
consi der i ng doi ng i s a r evocabl e br each of f ai t h. They wer e
t r yi ng t o do a t r ansact i on bef or e t he December vot e and t hey t hen
say t he boar d has no cr edi bi l i t y. But her e i s what t hey poi nt t o,
Your Honor . How unusual i t was t hat l ong- t er mshar ehol der s, not
t he act i vi st s, but l ong- t er mshar ehol der s of Al l er gan ar e f ur i ous.
We go t o t he next page. T- Rowe Pr i ce, J ackson Squar e, 12: 41
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ot her l ong- t er mshar ehol der s wr i t e t o Al l er gan and publ i cl y say
t hi s vot e - - by t he way, i t ' s our vot i ng t hat t hey' r e t r yi ng t o
bl ock. These ar e our pr oposal s. These ar e l ong- t er mshar ehol der s
sayi ng don' t depr i ve us of t he meani ngf ul vot e t o r emove t hese
di r ect or s and change t hese byl aws.
Your Honor , t hi s i s al l you have f r omt he l ong- t er m
shar ehol der s, t hat Al l er gan i s act i ng agai nst t hei r i nt er est .
Your Honor , so how does Al l er gan' s r el at i onshi p wi t h t he
I SS t ur n out ? I t st ar t ed on a good f oot i ng. They want ed t o bui l d
a r el at i onshi p. Now, how does Al l er gan vi ew t he l eadi ng
shar ehol der advi sor y ser vi ce?
Pl ease pl ay t he t ape.
MR. HOLSCHER: So t he l eadi ng shar ehol der ser vi ce i n t he
Uni t ed St at es, Your Honor , doesn' t have i nt egr i t y because t hey
di sagr ee wi t h Al l er gan. So how have t he shar ehol der s done si nce
our pr oposal i n Apr i l , Your Honor ? How ar e t he shar ehol der s
doi ng? The mar ket val ue of Al l er gan was 35 mi l l i on bef or e our
val ue unl ocki ng pr oposal . I don' t know what i t i s t oday, but as
of yest er day i t ' s 54 bi l l i on, a $19 bi l l i on i ncr ease.
By t he way, Your Honor , t hose ar e Al l er gan empl oyees.
I n f act , t hei r pl ai nt i f f her e who sai d she sol d 60, 000 shar es t oo
l ow, her por t f ol i o has done qui t e wel l . Those ar e Al l er gan
empl oyees. Those ar e r et i r ees. Those ar e i ndi vi dual s who own
t hi s st ock.
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I f you i nt er f er e wi t h t he mar ket and t he pr oposal , i f
you i nt er f er e as t hey want you t o i nser t your sel f , you' l l be
i nt er f er i ng wi t h how t he mar ket oper at es. Your Honor , I st r ongl y
bel i eve t hat our cl i ent s' pr oposal i s phenomenal and a val ue
unl ocki ng pr oposal . Al l er gan at t hi s poi nt di sagr ees. The mar ket
wi l l deci de, not a cour t . But t o say t hat shar ehol der s have been
har med, t hat ' s $19 bi l l i on of added val ue. Mor e val ue has been
unl ocked i n Al l er gan si nce t hi s of f er t han I t hi nk t he 10 year s
bef or e, Your Honor .
Your Honor , how al so do we know t hat bef or e t hi s
of f er - - r emember , we' r e t ol d we have got i nsi de i nf or mat i on. We
have got some i nsi de i nf or mat i on t hat ' s gi vi ng us an advant age
when we ar e an of f er or maki ng a t oehol d. By t he way, Your Honor ,
t he r eason t hat t oehol ds ar e per mi ssi bl e and accept ed i s because
i t ' s under st ood t hat once you announce a pr oposal , wi t h a r el evant
r espect ed act i vi st l i ke Per shi ng Squar e, wi t hi n a coupl e of days
of t hemmaki ng a pr oposal , on aver age st ocks go up near l y
25 per cent . You ar e per mi t t ed t o have a t oehol d so t he aver age
cost t o acqui r e doesn' t skyr ocket .
And you see what happened af t er our of f er , Your Honor ?
What happened af t er our of f er ? The st ock skyr ocket s. The
shar ehol der s l i ke t he i dea, maybe Al l er gan' s management doesn' t
l i ke i t , but t hey l i ke t he i dea of some bel t t i ght eni ng. Maybe
get t i ng a combi nat i on wi t h Val eant unl ocki ng wi t h i nt er nat i onal
pl at f or m.
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So what happens, Your Honor ? How do we know t hat our
cl i ent s di dn' t have any i nsi de i nf or mat i on? Who has mor e i nsi de
i nf or mat i on about Al l er gan t han i t s CEO? Who woul d have mor e
i nsi de i nf or mat i on?
I f you pul l up Sl i de 24.
Your Honor , t he week bef or e we st ar t ed accumul at i ng our
shar es, he sol d 252, 000 shar es at a pr i ce of 123. Now t hi nk about
t hi s, Your Honor . Ther e i s a r eason why t he Al l er gan CEO i s not a
pl ai nt i f f . Because i t woul d show how i l l ogi cal t hi s i s, r i ght ?
The man wi t h t he most i nsi de i nf or mat i on i s comf or t abl e t hat , as
of Febr uar y, hi s company i s f ai r l y val ued. But what i s not baked
i n i s our cl i ent s' val ue enhanci ng of f er .
And what does he say? I asked hi m. Because, by t he
way, Your Honor , now he keeps sayi ng we' r e massi vel y under val ued
at 180, 190. I t ' s massi vel y under val ued. What di d he t hi nk i n
Febr uar y, Your Honor ?
I f you' d pl ay t he t ape.
MR. HOLSCHER: Your Honor , we bought t he st ock when i t
was f ai r l y val ued wi t h no i nsi de i nf or mat i on. And, Your Honor ,
what ' s happened si nce our pr oposal was announced? Al l er gan i s
t aki ng st eps t hat t hey t hi nk ar e shar ehol der enhanci ng t o t r y and
f end of f our of f er .
And, Your Honor , I want t o be ver y cl ear . I f our r i ght
t o vot e at December 18 i s st er i l i zed and st r i pped, t hen t he
1 12: 45
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i nvest ment communi t y i s goi ng t o bel i eve t hat our shar ehol der
val ue unl ocki ng pr oposal i s not goi ng t o go f or war d.
What has t hi s pr essur e on Al l er gan done, Your Honor ?
Let ' s j ust t ake R&D f or an exampl e, Your Honor .
I f we coul d pl ay t he t ape 29.
MR. HOLSCHER: I f we coul d pl ay vi deo 28, l et ' s hear
when t hey act ual l y st ar t ed r ei ni ng t hi s i n.
MR. HOLSCHER: Your Honor , t o be cl ear , Val eant and
Per shi ng Squar e st r ongl y suppor t R&D t o expand pr oduct l i nes and
wher e i t makes sense. And as par t of t hei r pr oposal , t hey have
al r eady communi cat ed t o Al l er gan t hey' r e goi ng suppor t t he R&D f or
Bot ox and ot her pr oduct s. But , Your Honor , Al l er gan' s i ncent i ves
wer e mi sal i gned. That ' s why t he shar ehol der s ar e r est l ess. Thei r
CEO get s pai d a bonus based on how much he spends on R&D. Ther e
i s no ot her company we' r e awar e of i n t he Uni t ed St at es t hat
act ual l y gi ves someone a bonus by how much you spend.
Your Honor , I ' mgoi ng t o t ur n t o t he st andi ng i ssue.
Al l er gan seeks a pr el i mi nar y i nj unct i on, Your Honor , based on PS
Fund' s pur chase of st ock i n Febr uar y, Mar ch and Apr i l f r omot her
peopl e, not f r omAl l er gan, at a t i me t hat i t s own CEO - - wi t hi n a
week t hat i t s own CEO t hi nks i t ' s f ai r l y val ued. And Al l er gan' s
counsel ci t es some out - of - ci r cui t di st r i ct cour t cases and says we
onl y ci t e one case.
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Your Honor , i t r emi nds me of an ar gument I had i n Or ange
Count y Super i or Cour t f i ve year s ago wher e I had a Cal i f or ni a
Supr eme Cour t case on poi nt and t he ot her si de ar gued f or 10
mi nut es I onl y had one case. Your Honor , i t ' s l i ke Brody her e.
I ' ve onl y got one r oyal f l ush.
Brody i s on al l f our s. You not i ce t hat counsel di dn' t
ci t e any l anguage f r omBrody or t he hol di ng f r omBrody. What does
Brody say? " We concl ude t hat t her e i s no pr i nci pl e di st i nct i on
bet ween r ul e 10B5 and 14e- 3 as r egar ds t he need f or a
cont empor aneous t r adi ng al l egat i on. We, t her ef or e, ext end t he
cont empor aneous t r adi ng r equi r ement t o i nsi der t r adi ng act i ons
br ought under sect i on 14E and r ul e 14e- 3. "
I won' t r ead al l t he quot es, Your Honor . Ther e i s no
par ent het i cal about you can seek an i nj unct i on or a company can do
t hat . No one has st andi ng. Your Honor , t he i ndi vi dual pl ai nt i f f ,
bot h Brody and t he Supr eme Cour t i n Rondeau say al l she get s i s
money damages i f she has a cl ai m. And bef or e she br i ngs a cl ai m,
she needs t o t al k t o Mr . Pyot t because he sol d hi s shar es ar ound
t he pr i ce t hat she sol d her s.
Your Honor , I can' t r ecal l ever bei ng bef or e a cour t
wher e a par t y was seeki ng a pr el i mi nar y i nj unct i on on a cl ai m
wher e t he Ni nt h Ci r cui t case on al l f our s says t hey can' t br i ng
i t .
Your Honor , at t hi s t i me, my col l eague i s goi ng t o
addr ess t he subst ant i al st eps and of f er i ssue at l engt h.
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THE COURT: Al l r i ght . Thank you.
MR. HOLSCHER: Your Honor , do you know how l ong I t ook
by chance? About 25 mi nut es?
THE COURT: Ten.
( LAUGHTER)
THE COURT: I t hi nk you t ook about 45 mi nut es, counsel .
Somet hi ng l i ke t hat .
MR. FRAWLEY: Good af t er noon, Your Honor . For t he
r ecor d, i t i s Br i an Fr awl ey f r omSul l i van Cr omwel l f or Val eant .
As Mr . Hol scher i ndi cat ed, I ' mgoi ng t o t ake t he cour t
t hr ough bot h sect i on 14( e) of t he Exchange Act , whi ch
i nt er est i ngl y enough, even t hough t hi s i s a case t hat ' s br ought
under sect i on 14( e) of t he Exchange Act , t he act ual st at ut or y
aut hor i t y f or t hi s case has yet t o be ment i oned so f ar t oday, as
wel l as r ul e 14e- 3 whi ch Mr . Wal d di d spend consi der abl e t i me on
t hi s mor ni ng. I ' mgoi ng t o expl ai n some of t he i ssues t hat wer e
r ai sed by Mr . Wal d and expl ai n how i t i s t hat t her e i s not
possi bl y a cause of act i on under any set of f act s her e, but
par t i cul ar l y not t he f act s t hat we have her e and t he f act s t hat
ar e not i n di sput e.
Coul d we put up Sl i de 2 f or a st ar t .
Thi s i s j ust a l i t t l e out l i ne of how we' r e goi ng t o
appr oach t he next coupl e of mi nut es her e. So r ul e 14e- 3 can' t
appl y her e and doesn' t appl y her e on i t s f ace i n a si t uat i on such
as we have her e wher e t he r el evant act or s not onl y di dn' t pur sue a
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t ender of f er at t he r el evant poi nt i n t i me, t hey af f i r mat i vel y
deci ded not t o. And i t cannot be t hat t he st at ut e or t he r ul e
appl i es i n t hese ci r cumst ances.
Second and i ndependent l y, by any measur e no def endant
t ook any subst ant i al st ep. And Mr . Wal d kept l eavi ng out t hat
wor d " subst ant i al . " And he al so l ef t out t he par t t owar d t he
t ender of f er dur i ng a per i od pr i or t o t he concl usi on of t he
t r adi ng on Apr i l 21.
And t hen t he t hi r d i ssue t hat Mr . Hol scher al l uded t o i n
t he begi nni ng of hi s pr esent at i on. I f Al l er gan i s cor r ect , i f
t hey' r e cor r ect t hat subst ant i al st eps wer e t aken her e; and i f
t hey' r e cor r ect t hat what t he of f er i ng per son means i s t hat an
of f er i ng per son, t he onl y per son, accor di ng t o Mr . Wal d, who i s
per mi t t ed t o t r ade i n advance of a t ender of f er , i f t he of f er i ng
per son means t he per son who t ook subst ant i al st eps, by t hei r own
ar gument Per shi ng Squar e t ook t hose st eps; t he exact same st eps
t hat Al l er gan cont ends means t hat Val eant was cont empl at i ng a
t ender of f er ; t he exact same st eps t hat Mr . Wal d says means
Val eant coul d buy t he shar es, t hose same st eps wer e t aken by
Per shi ng Squar e and Per shi ng Squar e i s, t hus, an of f er i ng per son
under t hei r l ogi c.
But t her e i s no way you can l i ngui st i cal l y separ at e t he
wor d " of f er or " and t he wor d " bi dder " and t he def i ni t i ons t hat ar e
gi ven t o t hem. The def i ni t i ons t hat t hey embr ace. And t hose ar e
wor ds, Mr . Wal d cont ended, t hat Per shi ng Squar e and Val eant gave
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t o t hemsel ves. To t he cont r ar y, t hose ar e wor ds t hat Al l er gan
gave t o us. But we embr aced t hem. The SEC gave t hemt o us as
wel l .
And you cannot , under any def i ni t i on of t he wor d, you
can' t l ook i n a di ct i onar y and say t hat somebody i s an of f er or .
They' r e a bi dder . They' r e somebody who made a t ender of f er or on
whose behal f a t ender of f er was made. And t hey don' t f i t i n t he
def i ni t i on of t he wor d " of f er i ng per son. "
The l ast t i me I checked, t he way you l ook at a r ul e, t he
way you l ook at a cont r act , t he way you l ook at a st at ut e i s you
st ar t wi t h t he pl ai n meani ng. And you can' t r ead t hose t wo wor ds
t o say t hat an of f er or i s not an of f er i ng per son. I j ust don' t
see how you can do i t .
So I want t o go t o t he next sl i de. I al so want t o st ar t
a l i t t l e bi t of basi c pr i nci pl es her e. Al l er gan has ar gued her e
t oday and ar gued i n t hei r br i ef t hat t he def endant s have some
bur den of showi ng t hat t hey f i t wi t hi n some nar r ow excl usi on t o
i nsi der t r adi ng and t hat we ar e ar gui ng t hat r ul e 14e- 3 cr eat ed an
except i on t o i nsi der t r adi ng. Thi s i s backwar ds. Ther e i s no
i nsi der t r adi ng her e.
Ther e was no i nsi de i nf or mat i on. Ther e was i nf or mat i on
t hat bel onged t o Val eant and Per shi ng Squar e and i t was t hei r
i nf or mat i on. Ther e i s no r ul e and t her e never has been a r ul e
t hat says par t i ci pant s i n t he mar ket ar e pr ohi bi t ed f r omt r adi ng
on i nf or mat i on t hat t hey per mi ssi bl y possess t hat i s nonpubl i c and
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mat er i al .
The United States v. Chiarella i n 1980 expr essl y
r ej ect ed t hat same ar gument . The cour t act ual l y sai d t hat t hat
ar gument quot e, " depar t s r adi cal l y f r omest abl i shed doct r i ne. "
That ' s what Al l er gan' s t heor y her e does. I t depar t s r adi cal l y
f r omt he l aw as i t exi st s and has al ways exi st ed.
Rul e 14e, by cont r ast , does cr eat e a nar r ow except i on t o
t he r ul e t hat per sons per mi ssi bl y i n possessi on of mat er i al
nonpubl i c i nf or mat i on cannot t r ade. And t hat r ul e r equi r es t hat
t her e be a t ender of f er cont empl at ed at t he t i me and t hat
i nf or mat i on r el at es t o t he t ender of f er . As we' r e goi ng t o see,
t hat di dn' t happen her e.
Let ' s go t o t he next sl i de.
As I sai d t o t he cour t , we wer e goi ng t o st ar t wi t h
f i r st pr i nci pl es and st ar t wi t h t he wor ds of t he st at ut e wher e
ever ybody shoul d have st ar t ed her e, but nobody has. 14e di ct at es
what can be r ul ed out by t he SEC under t hei r r ul e. I t ' s
wel l - est abl i shed t hat r ul e- maki ng has t o have i t s aut hor i t y by
st at ut e. And t he r ul e t hat ' s i n t he st at ut e and t he r ul e t hat we
must be gui ded by t oday says t hat t her e must be a f r audul ent ,
decept i ve or mani pul at i ve act or pr act i ces i n connect i on wi t h any
t ender of f er .
And we know what t hat wor d " i n connect i on wi t h" means.
I t ' s a phr ase t hat appear s el sewher e i n t he f eder al secur i t i es
l aws. I t ' s a phr ase t hat appear s i n sect i on 10( b) , a r el at ed
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pr ovi si on of t he Exchange Act . Sect i on 10( b) pr ohi bi t s t he same
act s, t he same f r audul ent , decept i ve or mani pul at i ve act s or
pr act i ces i n connect i on wi t h t he pur chase or sal e of secur i t i es.
And what t he Uni t ed St at es Supr eme Cour t has sai d i n Blue Chip
Stamps, i n 1975, i s t hat t hat means t her e i s no cause of act i on
under sect i on 10( b) wi t hout a pur chase or sal e of secur i t i es.
That same l ogi c hol ds t r ue her e. Ther e can' t be a
vi ol at i on of sect i on 14( e) and t her e l i kewi se can' t be a vi ol at i ng
of r ul e 14e- 3 unl ess i t ' s i n connect i on wi t h a t ender of f er .
We go t o Sl i de 6.
You don' t have t o t ake my wor d f or i t because t he SEC
sai d t he same t hi ng. The r el ease accompanyi ng r ul e 14e- 3 says,
" The pr ovi si on i mpl ement s exi st i ng st at ut or y r equi r ement s and wi l l
be appl i cabl e t o any t ender of f er . " The SEC l i kewi se sai d, " I t
shoul d be not ed t hat t he r ul e appl i es onl y i n t he cont ext of
t ender of f er s. "
As we' r e goi ng t o see i n a moment , Your Honor , t her e was
no t ender of f er and t her e was no t r adi ng i n t he cont ext of a
t ender of f er her e.
I n or der t o under st and t he evi dence and t he evi dence
t hat Al l er gan mi sconst r ues, we have t o under st and t he nuances of
t hei r ar gument . I n essence, Al l er gan says t hat any act i vi t y t hat
one under t akes i n any way r el at ed t o a pot ent i al acqui si t i on may,
i n hi ndsi ght , be vi ewed as r el at ed t o a t ender of f er i n t he event
such a t ender of f er i s commenced l at er .
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The t heor y t hat t hey' r e advanci ng t oday i s di r ect l y at
odds wi t h wher e Mr . Wal d concl uded hi s ar gument , wher e he
concl uded hi s ar gument sayi ng t hat Al l er gan' s boar d, i n t he
exer ci se of t hei r f i duci ar y dut i es, consi der ed t he pr oposal t hat
was made on Apr i l 22 and each pr oposal t her eaf t er , t wo mor e of
t hem, bef or e t he t ender of f er was commenced i n mi d J une.
Thr ee separ at e of f er s; t hr ee separ at e of f er s f or a
consensual mer ger t hat Mr . Wal d says t hat t he boar d, i n i t s
exer ci se of f i duci ar y dut i es, car ef ul l y consi der ed, consi der ed t he
mer i t s and whet her i t was i n t he best i nt er est of t he shar ehol der s
bef or e t hey decl i ned i t . But t he t heor y t hat t hey' r e espousi ng
t oday, t he t heor y t hat Val eant and Per shi ng Squar e shoul d have
assumed f r omt he out set t hat a t ender of f er was i nevi t abl e bel i es
t hat ar gument , because t he ar gument i s pr emi sed on t he i dea t hat
t her e never was goi ng t o be a negot i at i on. That we coul dn' t make
a pr oposal t hey coul d br i ng t o t he t abl e because i t wasn' t goi ng
t o happen.
That ' s not t he ar gument t hey' r e maki ng t oday. They' r e
maki ng a di f f er ent ar gument because t hey' r e sayi ng t hat t he boar d
was wi l l i ng t o consi der of f er s, was wi l l i ng t o consi der f ai r
of f er s, and woul d have accept ed a f ai r of f er i f t hey t hought one
was made. Thei r di r ect or , Mr . Pr oct or whose deposi t i on was t aken,
he sai d t he same t hi ng. He sai d, " We car ef ul l y consi der ed t he
of f er . We t hought about i t . I f i t was a f ai r of f er , we woul d
have accept ed i t . "
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Thei r i nvest ment banker Mr . Kat zman sai d t he same t hi ng.
Sai d t hat t hey consi der ed t he of f er , t hey consi der ed i t s val ue,
t hey t hought about i t , ul t i mat el y t hey concl uded t hat t hey di dn' t
want t o accept i t .
But i t can' t be t hat a t ender of f er was i nevi t abl e i n
Febr uar y bef or e t he pr i ce was even deci ded or what t he of f er was
goi ng t o be i n Apr i l , t hat we necessar i l y must have known t he
t ender of f er was goi ng t o happen. The onl y way we woul d know
t hat , i f we assume t hey wer e goi ng t o br each t hei r f i duci ar y
dut i es and not f ai r l y consi der any pr oposal s wer e made.
I t may be, as Mr . Hol scher al l uded t o, t hat t ur ned out
t o be t he case. But t hat ' s not t he basi s of f eder al secur i t i es
l i t i gat i on. Maybe t hat ' s a di f f er ent case somewher e i n t he f ut ur e
i n Del awar e.
Mr . Wal d went t hr ough some of t he hi st or y of 14e- 3 and
suggest s t hat i t suppor t s t he amor phous r eadi ng t hat t hey have
advanced t oday. And I suggest t o you, Your Honor , i t suppor t s
exact l y t he opposi t e.
Coul d we go t o Sl i de 7.
I t i s t r ue t hat t he ear l y ver si ons of r ul e 14e- 3 as
pr omul gat ed pr oposed t hat i t woul d r est r i ct al l per sons, i ncl udi ng
t he bi dder , f r ompur chasi ng shar es i n advance of a t ender of f er .
But t he r ul es pr ovi ded at t hat poi nt t hey woul d appl y onl y f r om
t he t i me a deci si on was i n f act made. And t hat r ul es made cl ear ,
on t he bot t omof Sl i de 7, " Bef or e t he i nt ent i on t o make a t ender
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of f er i s f or med dur i ng t he per i od whi ch a t ender of f er may be one
of sever al al t er nat i ves bei ng consi der ed by t he acqui r i ng per son,
t he r ul e di d not appl y. "
Mr . Wal d al so made some ar gument s about t he di f f er ence
bet ween " of f er or " and " bi dder " and " of f er i ng per son, " and how a
r egul at i on adopt ed by t he SEC 25 year s l at er makes cl ear t hat
" of f er i ng per son" has some ver y di f f er ent connot at i on. I n f act ,
t he or i gi nal ver si on of 14e- 3 used t he wor d " of f er or , " not
" bi dder . " Not " of f er i ng per son. " " Of f er or . " And t hen t he SEC
ul t i mat el y changed t hat . And t hi s i s al so cover ed i n t he exper t
r epor t of Pr of essor Por t noy.
And t hey sai d t hat " t he t er m' bi dder ' and ' subj ect
company' pr ovi de shor t - hand r ef er ences t o t he pr i nci pal
par t i ci pant s i n a t ender of f er and avoi d cer t ai n pej or at i ve t er ms
now commonl y used t o descr i be par t i ci pant s i n a t ender of f er . "
The SEC made cl ear what t hey' r e t al ki ng about i s t he
par t i ci pant s i n a t ender of f er , and t hey move f r omt he wor d
" of f er or " t o " bi dder " si mpl y t o avoi d pej or at i ve connot at i ons wi t h
t he wor d " of f er or . "
Now, as Mr . Wal d poi nt ed out i n t he f i nal ver si on of t he
r ul e, t hey i n f act swi t ched t o " of f er i ng per son. " And Mr . Wal d
of f er ed a number of hi ghl y specul at i ve r easons why t hat may have
occur r ed. But t her e i s a ver y obvi ous r eason as t o why i t
occur r ed. The pr i or ver si ons of t he r ul es di d not appl y t o t ender
of f er s by i ssuer s. I t onl y appl i ed t o t ender of f er s by bi dder s.
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So you coul dn' t have a r ul e i f you want ed i t t o appl y t o i ssuer s
t hat used t he wor d " bi dder " because an i ssuer i s not a bi dder .
So i n t he f i nal ver si on of t he r ul e, whi ch appl i es t o
t hi r d- par t y t ender of f er s and i ssuer t ender of f er s, t he r ul e was
changed t o " of f er i ng per sons. " The chr onol ogy does not suppor t
t he ar gument t hat Al l er gan has made her e t oday.
Al l er gan al so suggest ed t hat t he f act t hat t he SEC
i ni t i al l y sought t o ban t oehol d t r adi ng posi t i ons by t he bi dder or
of f er or suggest s some desi r e t o pr event t he ki nd of t r adi ng t hat
happened her e. The hi st or y i s qui t e t o t he cont r ar y. The SEC
made cl ear t hat t oehol d posi t i ons by put at i ve bi dder s was a good
t hi ng. And t he r eason why i t el i mi nat ed t he r est r i ct i on on
bi dder s f r ombuyi ng i n advance of t he deci si on t o make a t ender
of f er was t hat t he bi dder s woul d be second- guessed i n hi ndsi ght
much as occur r ed her e as t o when t hat deci si on was made.
Coul d we t ur n t o Sl i de 8.
So i n 1979, when t he commi ssi on el i mi nat ed t he
r est r i ct i on on bi dder s pur chasi ng i n advance of t hei r t ender
of f er , t he SEC sai d, " I t was al so not ed t hat t he i ncr eased r i sk
t hat pur chases made t o t est t he mar ket woul d be const r ued i n
hi ndsi ght t o have vi ol at ed t he pr oposal , woul d cause many
pr ospect i ve bi dder s t o st ay out of t he mar ket . Comment at or s wer e
of t he vi ew t hat i t woul d shi f t t he bal ance of r egul at i on and
woul d di ssuade bi dder s f r ommaki ng t ender of f er s. For t hese, as
wel l as ot her r easons, t he commi ssi on has det er mi ned not t o adopt
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t he pr oposal at t hi s t i me. "
So as Mr . Hol scher poi nt ed out , t he ent i r e pur pose of
t he Wi l l i ams Act i s t o not f avor ei t her of t he combat ant s i n a
pot ent i al t r ansact i on. Not management , not t he bi dder , not t o
out l aw hi st or i cal l y per mi ssi bl e t r adi ngs by t he bi dder . And
t hat ' s exact l y what happened her e.
Mr . Wal d made a number of ar gument s about why 14e- 3 does
not r equi r e a deci si on t o l aunch a t ender of f er . And t her e i s a
l i t t l e bi t of l i ngui st i cs i nvol ved i n t hat ar gument as wel l . The
def endant s have never suggest ed t hat t he oper at i ve t i me f or r ul e
14e- 3 t o become ef f ect i ve i s t he l aunchi ng of a t ender of f er .
What we have al ways ar gued, and what t he r ul e says, and what t he
cases say, i s t hat t her e needs t o be a deci si on t o pur sue a t ender
of f er . I t ' s a j ur i sdi ct i onal pr er equi si t e of sect i on 14( e) .
Unl ess t her e i s a connect i on t o t he t ender of f er , you can' t out l aw
t he t r adi ng. And t he r ul e makes t hi s cl ear .
Let ' s go t o Sl i de 9.
Mr . Wal d made some r ef er ence t o t hi s l anguage f r omt he
Exchange Act r el ease as wel l . When t he commi ssi on adopt ed t he
f i nal r ul e i n 1980, i t made t he change t hat has been t he subj ect
of much of t hi s mor ni ng' s di scussi on. I n r esponse, t he
comment at or ' s concer ned wi t h t he di f f i cul t y of i dent i f yi ng when a
per son act ual l y had det er mi ned t o make t he t ender of f er .
So t he commi ssi on was maki ng a change f r omt he pr i or
r ul e t hat sai d unequi vocal l y t hat t he day t hat mat t er ed was t he
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day t her e was a det er mi nat i on and i t i nst ead adopt ed t he
subst ant i al st eps l anguage t hat we have been t al ki ng so much about
t hi s mor ni ng.
And t he commi ssi on sai d, " Al t hough t he subst ant i al st eps
t est i s not t ot al l y obj ect i ve, i t pr ovi des a r easonabl e basi s t o
i dent i f y when t he pr ohi bi t i on of r ul e 14e- 3( a) woul d appl y. The
r easonabl e basi s t o i dent i f y when t he pr ohi bi t i on woul d appl y has
t o be when t her e i s a deci si on t o l aunch a t ender of f er , f or
ot her wi se, sect i on 14( e) of t he Exchange Act , t he basi s upon whi ch
t hi s r ul e exi st s, cannot be act i vat ed. "
The commi ssi on, i n f act , used t he same t est i n t he ear l y
ver si on of t he r ul e and i n t he cur r ent ver si on of t he r ul e. And
we' r e goi ng t o come back t o t hi s i n a moment . But t he commi ssi on
i dent i f i ed si x exampl es of conduct t hat may const i t ut e subst ant i al
st eps. That was not ment i oned one mi nut e i n t hi s mor ni ng' s
pr esent at i on.
The SEC has t ol d us what " subst ant i al st eps" mean. They
have t ol d us what i t means, and i t di dn' t happen her e. But t hose
same si x - - t hat si x- par t t est exi st ed i n t he pr i or r ul e, whi ch
makes cl ear t hat t he change i n t he r ul e si mpl y meant t hat under
t he cur r ent r ul e t her e needs t o be a deci si on t o pur sue a t ender
of f er as evi denced by subst ant i al st eps i n f ur t her ance of i t . And
we have not hi ng of t hat sor t her e t oday. Thi s i s obvi ous by ot her
aspect s of t he r ul e as wel l .
Let ' s go t o sl i de 10. 01: 11
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" Cour t s have r ecogni zed as wel l what t he pur pose of t he
subst ant i al t est i s" . The SEC v. Bangham case her e says
" subst ant i al st eps i nvol ve act i ons t hat ar e appr opr i at e sur r ogat es
f or t he subj ect i ve deci si on of t he of f er or t o under t ake t he t ender
of f er . "
And cour t s have consi st ent l y descr i bed r ul e 14e- 3 as
appl yi ng when t her e i s i n f act a t ender of f er i n t he mi dst .
The Uni t ed St at es Supr eme Cour t i n O'Hagen, we hear d a
l ot about t he O'Hagen case t hi s mor ni ng, but not i n any r el evant
f ashi on, sai d t hat t he Second Ci r cui t conci sel y descr i bed t he
r ul e' s t hr ust . " One vi ol at es r ul e 14e- 3( a) i f he t r ades on t he
basi s of mat er i al nonpubl i c i nf or mat i on concer ni ng a pendi ng
t ender of f er . "
Brody, anot her - - as Mr . Hol scher ment i oned, I ' msor r y I
onl y have t he Ni nt h Ci r cui t case and a Supr eme Cour t case, but
r ul e 14e- 3 r egul at es i l l egal i nsi der t r adi ng t hat t akes pl ace
whi l e a t ender of f er i s under consi der at i on. We' r e goi ng t o come
t o t he act ual evi dence i n a ver y shor t moment , but we' r e goi ng t o
show you t hat t her e was no such t ender of f er under consi der at i on.
Anot her aspect of t he r ul e t hat wasn' t addr essed t hi s
mor ni ng i s t hat t he r ul e i t sel f , by def i ni t i on, says t hat t he
i nf or mat i on possessed by t he t r ader must r el at e t o a t ender of f er .
I nf or mat i on can' t r el at e t o a t ender of f er i f i t doesn' t exi st .
I t seems t oo obvi ous t o say, but t hat ' s t he ar gument 01: 12
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t hey' r e bei ng pr esent ed wi t h t oday. I f t her e i s no t ender of f er ,
t he t r ader can' t have i nf or mat i on t hat r el at es t o a t ender of f er
and can' t have vi ol at ed t he r ul e.
So l et ' s come t o what t he evi dence act ual l y i s her e. We
had some ment i on of i t t hi s mor ni ng, but not t he act ual evi dence
t hat mat t er s.
The ent i r et y of Al l er gan' s cl ai mher e i s t hat because
t her e was a consci ous deci si on - - and a consci ous deci si on, no
doubt about i t . Let t her e be no doubt t hat t her e was a consci ous
deci si on i n Febr uar y of 2014 not t o pur sue a t ender of f er .
Al l er gan says t hat because t he par t i es deci ded t hey wer en' t goi ng
t o do i t , t hat means t hey wer e goi ng t o do i t . That ' s t he
ent i r et y of t he ar gument . And i t ' s wor se t han t hat .
Al l er gan put up a sl i de si mi l ar t o t hi s, t hi s mor ni ng,
whi ch I was a l i t t l e sur pr i sed at , but l et ' s put up Sl i de 12.
Thi s i s what Al l er gan sai d i s t he t ot al i t y of t hei r bur den of
pr oof her e i n or der t o pr ove i nsi der t r adi ng under sect i on 14( e) .
Al l er gan says, " When t he subst ant i al st eps have been t aken t o
acqui r e a t ar get company ( t hr ough what ever means) , when t hose
st eps woul d equal l y f aci l i t at e a t ender of f er and when a t ender
of f er occur s i n shor t or der , t he necessar y nexus can be pr esumed. "
That ' s t he ent i r e case. They' r e sayi ng you can pr esume
t he out come j ust because of t he sequence of event s. No pr oof of
t he act ual f act s because t hey have none. And no case suppor t s
t hi s and t hey ci t e none. And t he cases t hat t hey do ci t e don' t
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suppor t t hei r pr emi se at al l .
Not one of t hese cases st and f or t he pr oposi t i on t hat
act s t hat wer e t aken ent i r el y t o f aci l i t at e a mer ger or a pr oxy
cont est can, i n hi ndsi ght , be deemed act s i n f ur t her ance of a
t ender of f er . Not one. What t he cases say i s t hat act s t hat
wer e, i n f act , pr oven t o a j ur y i n most of t hese cases, because
t hey' r e r evi ewi ng a ver di ct , act s t hat wer e pr oven act ual l y
r el at ed t o a t ender of f er , t he r ul e can st i l l appl y even t hough
t he put at i ve pur chaser was st i l l consi der i ng ot her opt i ons.
That ' s a f ar cr y f r omwhat t he f act s ar e her e wher e t he
par t i es deci ded not t o pur sue a t ender of f er , i nst ead, t o pur sue a
mer ger . And t hat ' s what t hey di d.
The of f er t hat was del i ver ed t o Al l er gan on Apr i l 22
at t ached a mer ger agr eement . Anot her mer ger of f er was made on
May 28. Anot her one was made on May 30. And i t was onl y because
t hey r ef used t o engage and t hei r own shar ehol der s demanded t hat
t he def endant s put out a t ender of f er t hat i t happened.
And as Mr . Hol scher r ef er enced, you can' t j ust say t hat
i t ' s not bel i evabl e because t her e i s no evi dence on t he ot her
si de. You can' t say t hat seven peopl e per j ur ed t hemsel ves. You
can' t say t he par t i es t hat ar en' t even her e l i ed. We have ever y
si ngl e wi t ness t est i f yi ng under oat h t hat a t ender of f er was
consi der ed, r ej ect ed, and not t al ked about agai n unt i l t he
shar ehol der s asked us t o.
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I sai d I was goi ng t o come back her e. And r eal l y, t hi s
i s t he whol e subst ant i al st eps case. Thi s i s what t he SEC sai d i s
r el evant f or t hi s cour t t o consi der i n t hi nki ng about Al l er gan' s
cl ai mt hat subst ant i al st eps happened her e. The commi ssi on i t sel f
publ i shed i n t he Exchange Act r el ease accompanyi ng 14e- 3 what i t
bel i eves subst ant i al st eps coul d be. I t says, one, vot i ng on a
r esol ut i on by t he of f er i ng per son' s boar d of di r ect or s r el at i ng t o
a t ender of f er . That ' s pr et t y cl ear of act s t hat r el at e t o a
t ender of f er .
The f or mul at i on of a pl an or a pr oposal t o make a t ender
of f er . That ' s pr et t y cl ear as wel l . I t was ver y much i n
connect i on wi t h t he t ender of f er .
And t hen t he l ast one. And Al l er gan di d t hi s i n t hei r
br i ef and t hey di d i t i n t hei r pr esent at i on agai n t hi s mor ni ng.
They j ust sni pped t hi s l ast one and sai d t hat act i vi t i es whi ch
subst ant i al l y f aci l i t at e a t ender of f er - - and t hen l ef t out t he
r est - - can be subst ant i al st eps.
But what t he SEC says her e i s t hat act i vi t i es whi ch
subst ant i al l y f aci l i t at e a t ender of f er whi ch ar en' t t hemsel ves
di r ect l y r el at ed t o a t ender of f er can be subst ant i al st eps.
Ther e i s not even an asser t i on t hat any of t hat occur r ed her e.
And t hen much l i ke any r ul e or st at ut e or cont r act ual
pr ovi si on, i f Al l er gan i s goi ng t o cont end t hat somet hi ng besi des
t hese exampl es, al l si x of t hemt hat t he SEC has gi ven, can
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const i t ut e subst ant i al st eps, you have t o l ook at what t he common
t hr ead i s i n t he exampl es, and anyt hi ng el se has t o be consi st ent
wi t h i t . That ' s what t he cour t sai d i n SEC v. Bangham.
I t ' s pr et t y obvi ous what t he common t hr ead i s her e. I t
has t o r el at e t o a t ender of f er . That ' s what i t says, but t hat ' s
not what Al l er gan' s pr oof i s.
Al l er gan quot es out of cont ext some comment s f r om
banker s of Val eant and says t hat because wor k t hat pr oceeds
t owar ds a mer ger coul d be t he same wor k t hat one mi ght do i n t he
abst r act t owar ds a t ender of f er . And t hat i s t hei r evi dence t o
suggest t hat t her e was i n f act wor k done by somebody, t hey don' t
say who, i n f ur t her ance of a t ender of f er .
But t hey di dn' t act ual l y put t he t est i mony up because i t
woul dn' t r eal l y wor k wi t h t hei r t heor y. But Mr . Meht a, who t hi s
concept was at t r i but ed t o, sai d somet hi ng qui t e di f f er ent . He was
asked a quest i on by Al l er gan. Thi s i s page 64 of hi s deposi t i on
t r anscr i pt . " I n what cont ext i n Apr i l di d Val eant and Bar cl ays
di scuss a t ender of f er as a possi bl e al t er nat i ve st r at egy?"
And I shoul d ment i on t hat Bar cl ays wasn' t hi r ed unt i l
Apr i l . I t coul dn' t have been doi ng anyt hi ng i n Febr uar y or i n
Mar ch or i n t he f i r st 15 days of Apr i l i n r el at i on t o a t ender
of f er because i t wasn' t t her e. I t di dn' t even know about i t .
They wer e r et ai ned i n t he mi ddl e of Apr i l .
Mr . Meht a was asked:
" QUESTI ON: I n what cont ext i n Apr i l di d Val eant and 01: 19
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Bar cl ays di scuss a t ender of f er as a possi bl e al t er nat i ve
st r at egy?"
Mr . Meht a, t he managi ng di r ect or of Bar cl ays r esponds,
" We di scussed i t as a possi bl e t ool amongst ot her var i abl es t hat
we j ust di scussed, but we wer e t ol d t hat i t was not cont empl at ed
at t hat t i me. "
What el se di d Mr . Meht a say? Mr . Meht a al so t est i f i ed,
even t hough, as Al l er gan poi nt s out , t hat he sai d t hi s was al ways
a t ool , mi ght come up i n any acqui si t i on. But t he managi ng
di r ect or of Bar cl ays has never wor ked on a t ender of f er f or an
Amer i can company i n hi s l i f e. Ever .
And we al l know why t hi s i s. Mr . Wal d r ef er enced i t .
I t ' s because t ender of f er s i n a nonconsensual si t uat i on ar e mer el y
j ust negot i at i ng t ool s.
So l et ' s go t o Sl i de 15. We' r e goi ng t o go t hr ough t he
si x el ement s t hat t he SEC suggest ed t hat we go t hr ough r at her t han
t hose t hat Al l er gan f ocuses on t hat ar e not par t of t he SEC' s
r ul e- maki ng. The SEC says t hat a subst ant i al st ep can be vot i ng
on a r esol ut i on by t he of f er i ng per son' s boar d r el at i ng t o t he
t ender of f er .
Her e we have on Sl i de 15, i t wasn' t unt i l May 30, al most
a mont h and a hal f af t er t he t r adi ng was compl et ed, t hat t he
Val eant boar d f i r st appr oved pr oceedi ng wi t h t he t ender of f er .
And what happened bef or e t hen we al so know f r omt he
cont empor aneous r ecor ds. Not f r omt he hi ndsi ght , not f r omt he
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specul at i on, and not f r omt he al l egat i ons.
Sl i de 16.
Pr i or t o May 30, Al l er gan' s boar d expr essl y pr ohi bi t ed
management f r ompr oceedi ng wi t h ei t her a pr oxy sol i ci t at i on or a
t ender of f er . Thi s i s Exhi bi t 70. Apr i l 7, 2014 mi nut es.
Now, Al l er gan of f er s a sor t of st r ange ar gument t hat
because peopl e wer e cogni zant of t he l aw and t hey t ook st eps t o
compl y wi t h i t , i t somehow shows consci ous gui l t of somet hi ng, but
t hey don' t ever say what i t i s. Of cour se t he advi ser s of
Per shi ng Squar e and Val eant wer e awar e of what t he l aw was. Of
cour se t hey wer e. And of cour se t hey t ook st eps t o compl y wi t h
i t . But agr eei ng or t aki ng st eps t o compl y wi t h t he l aw doesn' t
suggest t he opposi t e.
So t hi s i s t he r el at i onshi p agr eement , Exhi bi t 54. And
i n t he r el at i onshi p agr eement t he par t i es agr eed t hat t hey had not
t aken subst ant i al st eps. The par t i es agr eed t hey wer en' t goi ng t o
l aunch a t ender of f er wi t hout t he mut ual consent of one anot her .
And you can' t cont or t an agr eement not t o do somet hi ng wi t h an
acknowl edgment t hat you i n f act had al r eady done i t . That ' s not
evi dence. That ' s j ust i dl e specul at i on.
Thi s i s Mr . Ackman' s deposi t i on. I ' msor r y I don' t have
al l of t he pr et t y vi deos t hat my col l eague had shown, but Mr .
Ackman' s deposi t i on. Mr . Ackman t est i f i ed under oat h, " We had no
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pl ans t o l aunch a t ender of f er . We di dn' t want t o l aunch a t ender
of f er nor di d t hey, and t hey di dn' t want us t o ei t her . So
t her ef or e we bui l t i n a pr ovi si on t hat r equi r ed mut ual consent i n
or der t o do so. "
Ther e was no pl an, no pr oposal t o pr oceed wi t h a t ender
of f er dur i ng t he per i od of t he t r adi ng.
Thi s i s Mr . Pear son' s deposi t i on. Much t o t he same
ef f ect . Mr . Pear son t est i f i ed, " We wer e not , at t hat poi nt i n
t i me, we never di scussed doi ng a publ i c of f er i ng f or shar es. I n
my under st andi ng, I had been i nvol ved i n t wo ot her host i l es and at
nei t her poi nt di d we even get t o t hat poi nt . So we wer e hopi ng or
I was hopi ng t hat t he boar d woul d come t o us. I t hi nk we ar e al so
t al ki ng about a r ef er endum. That was an i dea t hat came up, t hat
maybe we coul d do a r ef er endum. And we t al ked a l ot about get t i ng
t o a speci al meet i ng t hat , i n t he end, t he shar ehol der s woul d have
t hei r say at a speci al meet i ng. "
So t hat ' s what t he evi dence i s. The evi dence i s t hat
t he par t i es t hat mat t er her e, t he par t i es who wer e maki ng t he
pr oposal wer e onl y pl anni ng t o make a mer ger pr oposal . And whi l e
Mr . Wal d bel i t t l ed i t t hi s mor ni ng, t he r eason f or t hat was
evi dent t o ever ybody.
Ever yone knew t hat a t ender of f er was not goi ng t o be a
mechani smt o acqui r e Al l er gan. Ever ybody knew i t because i t has
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been t he case f or decades. Her e on Sl i de 20 i s Ackman' s
deposi t i on as wel l . " Di d you ever di scuss pr oceedi ng by way of a
t ender of f er wi t h anyone ot her t han your l awyer s?"
" ANSWER: No. "
" QUESTI ON: Or an exchange of f er ?"
" ANSWER: No. Because t her e has not been - - you can' t
do a host i l e t ender of f er . Ther e i s not an exampl e of a
successf ul host i l e t ender of f er f or 30 year s, and t he r eason f or
t hat i s t he poi son pi l l . And you guys shoul d know t hat r eal l y
wel l because t he ot her l aw f i r mwor ki ng on t hi s i nvent ed t he
poi son pi l l , r i ght ? Once you r eal i ze t hat a company can put i n
pl ace a poi son pi l l , a boar d can, a t ender of f er i s wor t hl ess. "
Let ' s go t o Sl i de 22. Thi s i s Mr . Pear son' s deposi t i on.
" QUESTI ON: So you do not r ecal l get t i ng advi ce at t hat
meet i ng about whet her Per shi ng Squar e and Val eant woul d be
co- bi dder s f or a publ i cl y announced of f er i ng of Al l er gan shar es?"
" ANSWER: We di dn' t t al k about i t . That wasn' t par t of
t he game pl an. "
" QUESTI ON: What was t he game pl an i f t he boar d di dn' t
end up negot i at i ng wi t h you?"
" ANSWER: Cal l i ng a speci al meet i ng. "
" QUESTI ON: To r epl ace t he boar d?"
" ANSWER: Yes, whi ch i s what we' ve done. "
The t hi r d- par t y advi ser s, as Mr . Hol scher ment i oned,
gave t est i mony t o t he same ef f ect .
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I do have one deposi t i on cl i p.
Coul d we put up 23?
Thi s i s Mr . Schi l l er , t he chi ef f i nanci al of f i cer of
Val eant .
THE COURT: Counsel , you want t o st ar t over ? I don' t
t hi nk t hat can be hear d. You mi ght t ake t he mi cr ophone and bend
i t down t owar ds your r ecor der . I f not , we can r ead al ong wi t h t he
wor ds.
MR. FRAWLEY: So al l of t he t est i mony i s consi st ent f r om
t hi r d par t i es and f r omt he par t i es, but so ar e t he document s.
Thi s i s, agai n, May 30 Val eant boar d mi nut es wher e t he
boar d di d i n f act aut hor i ze a t ender of f er f our and a hal f mont hs
bef or e t hi s l i t i gat i on was f i l ed. And t he boar d sai d t hat
i nvest or s' per spect i ves on t he May 28 i nvest or meet i ng - - and t hat
was t he Sanf or d Ber nst ei n conf er ence t hat Mr . Hol scher r ef er enced
and Mr . Schi l l er j ust t est i f i ed about .
" The sent i ment i n t he mar ket t hat t he cor por at i on shoul d
pur sue bot h a meet i ng of shar ehol der s and an exchange of f er and
t he t i me l i ne f or such act i vi t i es wer e among t he pr eci pi t at i ng
causes f or aut hor i zi ng a t ender of f er on May 30. "
So t hat ' s t he f i r st par t of t he SEC' s t est , was t her e
appr oval s t o pur sue a t ender of f er . And t her e most cer t ai nl y was
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not .
The SEC' s t est al so t al ks about whet her t her e was
f i nanci ng ar r anged f or a t ender of f er .
And so l et ' s go t o Sl i de 27.
We' r e goi ng t o go ver y qui ckl y t hr ough some evi dence on
t hi s poi nt , but t he evi dence i s unequi vocal and undi sput ed t hat
Val eant di d not ar r ange f i nanci ng f or a t ender of f er unt i l l at e
May 2014 and t hat Val eant di d not pr epar e or aut hor i ze t he
pr epar at i on of any t ender of f er mat er i al s, whi ch i s anot her one of
t he SEC' s pot ent i al subst ant i al st eps unt i l l at e May or J une.
So l et ' s go t o Sl i de 28.
Her e agai n i s not par t i es who have some mot i ve t o l i e i n
t hi s case, but t he deposi t i on t est i mony of Mr . Wol f e f r omRoyal
Bank of Canada. Mr . Wol f e i s asked t he quest i on what t ype of
of f er was cont empl at i ng gi ven t hat RBC i s sayi ng t hey woul d commi t
t o br oad f i nanci ng ear l y i n t he week of Apr i l 14. " What t ype of
of f er was cont empl at ed at t he t i me t hi s pr esent at i on was
pr epar ed?"
" THE WI TNESS: Pr oxy mer ger . "
" QUESTI ON: Was t her e any di scussi on of a pot ent i al
t ender of f er at t hi s poi nt i n t i me?"
" ANSWER: No. "
" QUESTI ON: Okay. When di d RBC f i r st di scuss t he
possi bi l i t y of a t ender of f er wi t h Val eant ?"
" ANSWER: My r ecol l ect i on i s we di d not do t hat unt i l
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somet i me i n May. "
I f you t ur n t o Sl i de 30, t hi s i s now Mr . Meht a f r om
Bar cl ays agai n bei ng asked quest i ons by Al l er gan' s counsel .
" QUESTI ON: When di d Val eant f i r st r ai se t he possi bi l i t y
of a t ender of f er wi t h Bar cl ays?"
" ANSWER: To t he best of my r ecol l ect i on, i t was i n mi d
or l at e May. "
" QUESTI ON: What was t he cont ext i n whi ch Val eant r ai sed
t he possi bi l i t y of pur sui ng a t ender of f er t o acqui r e Al l er gan?"
" ANSWER: I t hi nk t her e wer e t wo pr i mar y cont ext s. One
was r equi r i ng our f i nanci ng commi t ment s t o r ef l ect t he possi bi l i t y
of a t ender of f er , and t he second was a r equest t o have us act as
a deal er / manager f or a t ender of f er . "
Now, t he l ast par t of t hat answer i s yet anot her one of
t he SEC' s t est s, and t hat i s when di d t he put at i ve acqui r er
ar r ange f or a deal er / manager t o act as a deal er / manager i n t he
t ender of f er whi ch, agai n, t he evi dence i s undi sput ed di dn' t
happen unt i l at l east t he end of May.
And t hi s i s not - - t hi s i s easi l y document ed as t he
wi t nesses al so poi nt ed out .
Let ' s go qui ckl y t o Sl i de 31.
Thi s i s agai n Mr . Wol f e f r omRBC made cl ear t hat t her e
was di f f er ent wor k t hat needed t o be done by t he f i nanci ng sour ces
i f t her e was goi ng t o be a t ender of f er , and t hat t hat wor k di dn' t
happen unt i l at l east t he end of May.
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Tur n t o Sl i de 36.
So i n t er ms of subst ant i al st eps, t hese ar e t he st eps
t hat mat t er . These ar e what t he SEC says mat t er s f or measur i ng
whet her or not t her e was subst ant i al st eps t aken. I n l at e May i s
when any def endant f i r st sought t ender of f er f i nanci ng. I n l at e
May i s when t he pr epar at i on of t ender of f er document s commenced.
I n ear l y J une i s when par t i es di scussed pot ent i al exchange agent
i n connect i on wi t h t he exchange of f er .
I n ear l y J une par t i es began di scussi on about r et ai ni ng a
deal er / manager . I n mi d J une Val eant f or med t he subsi di ar y t hat
woul d act as t he pur chaser i n t he t ender of f er .
Thi s i s evi dence. I t ' s not negat i ve specul at i on about
what peopl e mi ght have t hought because t hey r ef l ect ed t hei r i nt ent
not t o commence a t ender of f er i n t hei r document s.
Ther e was a f ai r amount of hyper bol e t hi s mor ni ng as
wel l about t he t ender of f er and i t s symbol i smher e.
Coul d we t ur n t o Sl i de 35.
The evi dence i s undi sput ed t hat a t ender of f er , a
host i l e t ender of f er can' t succeed her e. Now, Al l er gan cont ends
t hat you coul d pr oceed wi t h your pr oxy cont est , but t hat doesn' t
make t he t ender of f er anymor e val uabl e at pr esent . Al l er gan has
al so t ol d t he SEC t hat even i f a t ender of f er does succeed, t hat
i t won' t succeed i n acqui r i ng Al l er gan because t he shar ehol der
vot e st i l l needs t o happen.
The t ender of f er was a negot i at i ng t ool . I t wasn' t a 01: 35
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t ool t o acqui r e Al l er gan and i t wasn' t a t ool t hat was i nvoked
unt i l J une.
Al l er gan has al so ar gued t hat t he t ender of f er was
i nevi t abl e, but i t s own evi dence doesn' t say t hat . As we st ar t ed
t oday, t hey cont ended t hat t hey wer e goi ng t o negot i at e i n good
f ai t h i f t hey got a pr oposal t hat t hey t hought was at t r act i ve.
That means a t ender of f er wasn' t i nevi t abl e. The exper t evi dence
t hat t hey r ef er t o doesn' t suppor t i t ei t her .
Coul d we put up t he Danes exhi bi t .
I t i s not r emot el y i nevi t abl e t hat par t i es t hat pr oceed
wi t h an unsol i ci t ed pr oposal - - and Al l er gan l i kes t o cal l t hem
host i l e pr oposal s. I don' t r eal l y car e what t hey cal l t hem- -
wi l l end up i n a t ender of f er . Thi s i s t he f act s. 46 per cent of
si t uat i ons wher e a put at i ve acqui r er has made an unsol i ci t ed
pr oposal , i t al so ul t i mat el y i nvol ved t ender of f er . That doesn' t
make i t i nevi t abl e. That doesn' t make i t subst ant i al st eps i n
f ur t her ance of a t ender of f er . As t he evi dence i ndi cat es, i t
di dn' t .
I ' mgoi ng t o br i ef l y go t hr ough t he of f er i ng per son as
wel l and I ' l l do t hi s br i ef l y because Mr . Hol scher t ouched on
sever al of t hese poi nt s.
Let ' s put up Sl i de 37.
So r at her t han engage i n t he l i ngui st i c gymnast i cs t hat
Al l er gan has done her e, l et ' s j ust l ook at t he r ul e i t sel f . The
r ul e says an of f er i ng per son i s any per son who has t aken a
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subst ant i al st ep or st eps t o commence, or has commenced a t ender
of f er .
And act ual l y, l et ' s go t o Sl i de 39. Sor r y.
But vi r t ual l y al l of t he st eps t hat Al l er gan r el i es on
i n suppor t of t hat ar gument ar e st eps t hat wer e t aken excl usi vel y
by or equal l y by Per shi ng Squar e. Al l er gan ar gued i n i t s r epl y
br i ef t hat subst ant i al st eps wer e t aken t hr oughout t he t r adi ng
per i od by hol di ng numer ous meet i ngs wi t h Per shi ng Squar e
execut i ves, r et ai ni ng l egal counsel , negot i at i ng and ent er i ng i nt o
t he Per shi ng agr eement , si gni ng conf i dent i al i t y agr eement s and
engagi ng i n due di l i gence.
Per shi ng Squar e was obvi ousl y at t he meet i ng wi t h t he
execut i ves. Per shi ng Squar e r et ai ned l egal counsel . They' r e her e
i n t he r oomt oday. Per shi ng Squar e obvi ousl y negot i at ed t he
Per shi ng agr eement . I t was a par t y t o i t . I t ' s al so a par t y t o
t he conf i dent i al i t y agr eement .
I t was act ual l y Per shi ng Squar e t hat was conduct i ng t he
due di l i gence on Val eant , not on Al l er gan. And of cour se Per shi ng
Squar e i s t he ent i t y t hat pur chased t he t oehol d t hat has us her e
t oday.
So subst ant i al st eps wer e t aken. And i f subst ant i al
st eps wer e t aken i n f ur t her ance of a t ender of f er at some poi nt
pr i or t o Apr i l 21, t hey wer e t aken equal l y, i f not as much, by
Per shi ng Squar e. And i t ' s an of f er i ng per son under t he pl ai n
l anguage of t he r ul e. You don' t have t o l ook at some ot her ki nds
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of r ul es, or you don' t have t o l ook anywher e. That ' s what t he
r ul e says.
Li kewi se, as I t ouched on t hi s mor ni ng, and I ' mnot
goi ng t o spend ver y much t i me on i t , you cannot l ook i n any
di ct i onar y or any case or anywher e and t r y t o say t hat t he wor d
" of f er or " and t he wor d " bi dder " means somet hi ng di f f er ent t han
of f er i ng per son. We have a def i ni t i on f or " bi dder " and f or
" of f er or . " I t says any per son who makes a t ender of f er or on
whose behal f a t ender of f er i s made.
That sounds t o me l i ke somebody who i s maki ng an of f er .
That sounds l i ke an of f er i ng per son. You can l ook i n Webst er ' s or
Oxf or d or even a Spani sh di ct i onar y, t hat ' s what you ar e goi ng t o
f i nd i n t her e, t hat a per son who makes an of f er or on whose behal f
an of f er i ng i s made i s an of f er i ng per son.
And t he cour t s have used t hose wor ds i nt er changeabl y as
wel l . I ' mnot goi ng t o go t hr ough t hemal l t o save some t i me
her e, but on Sl i de 40, United States v. O'Hagen, agai n t he Supr eme
Cour t i s usi ng t he wor d " of f er or " t o r ef er t o of f er i ng per son
under t he r ul e.
On Sl i de 41 we have col l ect ed some cases, some of whi ch
ar e t he cases t hat Al l er gan ar e r el yi ng on wher e t he cour t s ar e
r ef er r i ng t o t he of f er i ng per son as t he of f er or because we al l
know t hat ' s what i t i s.
And t hen we have Hollywood Casino Corporation whi ch
Al l er gan di smi sses i n i t s r epl y br i ef as a mer e di st r i ct cour t
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case f r omout si de t he ci r cui t , al t hough i t has no cases on t hi s
poi nt , so I guess we' r e a l i t t l e bi t ahead of t hemon t hat .
The cour t i n t he Nor t her n Di st r i ct of Texas sai d t hat i f
t her e ar e t wo ent i t i es wor ki ng t oget her as a gr oup col l ect i vel y
t owar ds an acqui si t i on, and i f t hat ' s t he pl ai nt i f f ' s t heor y, t hey
have pl ed t hemsel ves out of cour t because t hey' r e al l of f er i ng
per sons. That i s Al l er gan' s t heor y. That ' s t he t heor y t hat t hey
have put f or t h her e t oday and i n t hei r SEC f i l i ngs.
I n i t s r epl y br i ef , Al l er gan sai d an of f er i ng per son can
t r ade based on mat er i al nonpubl i c i nf or mat i on about i t s own
f or t hcomi ng t ender of f er . That sounds l i ke t he of f er or t oo.
Per shi ng Squar e di d make t he t ender of f er . Mr . Hol scher showed
you t he document s t hi s mor ni ng.
Go t o Sl i de 45.
The SEC sai d Per shi ng Squar e shoul d be made t he of f er or .
Sl i de 46, Mr . Hol scher showed you t hat t oo. The of f er or
i s Per shi ng Squar e.
Sl i de 47. I t has been Al l er gan' s posi t i on t hr oughout ,
her e and i t s own publ i c f i l i ngs, t hat Val eant and Per shi ng Squar e
ar e wor ki ng t oget her t o acqui r e Al l er gan. That has been t he
t hesi s of t hei r publ i c r el at i ons campai gn f r omt he get - go. So
Al l er gan has sai d i n i t s SEC f i l i ngs, " We bel i eve t oday' s
announcement i s a f ur t her at t empt by co- bi dder s Per shi ng Squar e
and Val eant t o acqui r e Al l er gan at a gr ossl y i nadequat e pr i ce. "
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Wel l , i f Per shi ng Squar e and Val eant ar e t r yi ng t o acqui r e
Al l er gan, t hen bot h of t hemar e of f er i ng per sons.
Al l er gan t ol d t he SEC i n a l et t er t o t he SEC seeki ng t o
cause t he SEC t o t ake act i on i n r espect of ei t her one of us, t hey
sai d t hat def endant s f unded and f or med PS Fund 1 f or t he sol e
pur pose of l aunchi ng a host i l e bi d f or Al l er gan. I f we f unded and
f or med t he ent i t y i n or der t o make a host i l e bi d f or Al l er gan,
t hen bot h ent i t i es ar e of f er i ng per sons because t hey ar e t he
ent i t i es t hat ar e maki ng t he of f er , t hey ar e t he ent i t i es t hat ar e
seeki ng t o acqui r e Al l er gan, and t hey ar e t he ent i t i es t hat ar e
per mi t t ed t o t r ade under t he expr ess l anguage of t he r ul e.
And wi t h t hat I ' mgoi ng t o t ur n t he podi umback t o
Mr . Hol scher t o r ound t hi s out .
MR. HOLSCHER: Your Honor , I ' mj ust goi ng t o f i ni sh wi t h
a br i ef summar y of some of t he i nequi t abl e conduct , set t he
f r amewor k qui ckl y and t hen wr ap up by comi ng back t o t he hur dl es.
We under st and we' l l have l ess r ebut t al t i me because we' r e t aki ng
mor e of our t wo hour s now.
Your Honor , t he pr emi se of seeki ng ext r aor di nar y
equi t abl e r el i ef i s a par t y must have cl ean hands. And t he case
l aw i s cl ear t hat i f you show i nequi t abl e conduct r el at i ng t o t he
same i ssues, t hat t hat i t sel f i s a separ at e bar , even i f ever y
el ement f or seeki ng a pr el i mi nar y i nj unct i on i s met . And her e,
we' r e goi ng t o show t hat wi t h r espect t o t he unsol i ci t ed of f er , we
submi t , Your Honor , t hat t her e i s conduct by Al l er gan t hat i s
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evi dence of t hat .
I f we coul d j ust go t o vi deo 23.
MR. HOLSCHER: I f we coul d l ook at Sl i de 34. Your
Honor , we' r e goi ng t o show t hat i n f act Al l er gan ant i ci pat ed t hat
t hi s unsol i ci t ed of f er was made even bef or e t hey got i nf or mat i on
f r omAl l er gan. Al l er gan' s i nvest ment banker s devi sed a pl an t o
at t ack Val eant ' s f i nanci ng, t o at t ack i t s account i ng bef or e i t had
any i nf or mat i on t o at t ack i t . And t hat even t hough i t s CEO sai d
he was unawar e an of f er was made and di dn' t t ake any st eps, t hey
t ook st eps bef or e we showed up i n Apr i l .
Showi ng you now a Febr uar y 7 document , Your Honor . Thi s
i s an anal ysi s f r omBank of Amer i ca. Thi s i s one of t hei r
advi ser s al ong wi t h Gol dman t hat i s supposed t o be hel pi ng t hem
eval uat e our unsol i ci t ed of f er . So Febr uar y 7, Mer r i l l Lynch says
essent i al l y i n a r epor t t her e i s pot ent i al syner gi es her e of
2 bi l l i on and t hat Val eant and Al l er gan mi ght be i n pl ay.
And we know t hat t he CEO of Al l er gan r ecei ved t hat
because we have t he next sl i de whi ch shows he sends an e- mai l
sayi ng t he number s ar e br oadl y cor r ect . He r ecei ved t hi s
Febr uar y 7. So what does he do, Your Honor ? They' r e not caught
f l at f oot ed on Apr i l 22. What does he do wi t hi n a day, t wo days?
Next . He t hen st ar t s t o f al sel y pl ant i nf or mat i on i n
t he mar ket t hat Al l er gan shar ehol der s di dn' t want Val eant st ock.
Thi s i s t wo mont hs bef or e he made t he of f er .
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I f we coul d r ol l t he vi deo.
MR. HOLSCHER: He i s st uck, Your Honor . He i s sayi ng we
di dn' t know about i t . We wer e sur pr i sed. And he i s admi t t i ng he
di dn' t t al k t o any shar ehol der s, but he i s al r eady sayi ng i n t he
mar ket shar ehol der s don' t want t o t ake Val eant paper . Hasn' t
spoken t o t hemyet .
Let ' s go t o t he next e- mai l s.
As of Mar ch Al l er gan i s wor ki ng wi t h i t s advi ser s. Thi s
i s Mar ch 4. So t hi s i s mor e si x weeks bef or e t he unsol i ci t ed
of f er . They' r e pul l i ng up t he pl ans t o at t ack Val eant ' s
account i ng because t hey say t hey' r e i n pl ay. They haven' t done
any anal ysi s of Val eant ' s account i ng. Thi s pl an t o at t ack
Val eant ' s account i ng was r ol l i ng l ong bef or e t he unsol i ci t ed
of f er .
And t he bot t ome- mai l i s t he CFO sayi ng t o Gol dman Sachs
l at er i n t i me, st ar t put t i ng on your bl ack hat . Take of f your
whi t e hat .
Let ' s t al k about Gol dman Sachs f or a second. We' l l go
t o t he next sl i de. Gol dman Sachs i s hi r ed and has been wor ki ng
wi t h Val eant t o f i ght - - Gol dman Sachs has been wor ki ng wi t h
Al l er gan t o essent i al l y do ever yt hi ng t hey can t o f i ght t hi s
unsol i ci t ed of f er . Bef or e t hey hi r ed Gol dman Sachs, Gol dman Sachs
had l i st ed Val eant as a st r ong convi ct i on buy - - and her e i s t he
i mpor t ant par t , Your Honor - - wi t h a t ar get pr i ce of 164.
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Thi s i s t he i nvest ment bank t hey' r e wor ki ng wi t h now.
164. Your Honor , Gol dman Sachs had done a $2 bi l l i on st ock
of f er i ng f or Val eant , our col l ect i ve cl i ent , t he year bef or e.
So t hen what happens? I want t o ski p t he i nsi der
t r adi ng. So what does Mr . Pyot t and Al l er gan do? They t ake t he
hi ghl y unusual st ep, Your Honor , of goi ng t o Val eant ' s
shar ehol der s t o pr ovi de t hemi nf or mat i on t hat Val eant ' s account i ng
i s not cor r ect and i mpr oper . And you hear d t he house of car ds
r ef er ence. So t hey' r e goi ng speci f i cal l y t o Val eant st ockhol der s
t o t r y t o dr op Val eant ' s st ock pr i ce.
So r emember , Your Honor , Gol dman had t hemat a t ar get
pr i ce of 164. So what does Mr . Pyot t do? We have evi dence he
get s t he Val eant st ock l i st of t hei r st ockhol der s. Ther e' s
e- mai l s of goi ng behi nd enemy l i nes i n Canada t o t al k t o t he
st ockhol der s t o gi ve t hemi nf or mat i on. That ' s di r ect l y cont r ar y
t o t he posi t i ve anal ysi s of Gol dman and Bank of Amer i ca who have
anal yzed Val eant and have sai d i t ' s a st r ong company. I t shoul d
be val ued at 164. These ar e t hei r advi ser s.
So what does Mr . Pyot t do? He admi t s he met wi t h
Val eant st ockhol der s t o t r y and get t he Val eant st ock pr i ce t o
dr op. But , Your Honor , hi s shar ehol der s ar e get t i ng an of f er and
par t of i t i s Val eant st ock. He i s act ual l y r educi ng t he val ue t o
hi s own shar ehol der s. He i s supposed t o be a f i duci ar y.
I f we can pl ay t he t ape of Mr . Pyot t .
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MR. HOLSCHER: Let me st op t her e, Your Honor .
THE COURT: You don' t want t o - -
MR. HOLSCHER: I ' mgoi ng t o gi ve t hemt he f ul l r esponse,
Your Honor . Don' t wor r y. Thi s i s t he CEO of Al l er gan admi t t i ng
he i s meet i ng wi t h Val eant shar ehol der s t o cause, at 120, t he
st ock t o go f ar t her down. Gol dman Sachs and Bank of Amer i ca have
pr evi ousl y gi ven opt i mi st i c anal ysi s of t hi s company. Gol dman
Sachs sayi ng a t ar get pr i ce of 164. He' s t r yi ng t o hammer t he
st ock pr i ce.
I don' t have t i me t oday, Your Honor . I assur e you when
we get t o t he t r i al on t he mer i t s, I wi l l show t hat you even
i nt er nal peopl e at Al l er gan sai d some of t he mat er i al he was
gi vi ng was f al se.
So t hen what happened? Her e i s hi s expl anat i on. I ' m
pl ayi ng f or you hi s f ul l expl anat i on.
MR. HOLSCHER: So Mr . Pyot t says t hi s i s hi s obl i gat i on
wi t h t he boar d t o essent i al l y go t o Val eant shar ehol der s and
convi nce t hemt he pr i ce shoul d have gone down. Your Honor , t he
onl y i ndependent boar d member t hat we got t o depose, t he one,
f or mer gener al counsel of i nt er nat i onal company, f or mer execut i ve
of Mer ck, l et ' s hear what he sai d about t hi s boar d' s r equest t hat
he t ake t hese st eps t o meet wi t h Val eant ' s st ockhol der s t o cause
t he pr i ce t o go down.
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MR. HOLSCHER: I n f act , Your Honor , t hi s f i duci ar y
obl i gat i on wi t h hi s boar d, t he boar d member doesn' t even know he
i s doi ng i t . They l ost t hei r way, Your Honor . They' r e supposed
t o be f i duci ar i es val ui ng t he of f er . Mr . Pyot t i s awar e t hat hi s
j ob i s at r i sk. The shar ehol der s have vot ed, Your Honor , t wo
year s bef or e t o spl i t t he chai r man of t he boar d posi t i on and t he
boar d and t he CEO. They vot ed f or t hat . Al l er gan di dn' t do t hat
so he i s t her e.
So t hen what does he do? He st ar t s per sonal l y
over seei ng pr esent at i ons cal l ed " Val eant i s Vi l e" t o at t ack
Val eant whi l e he i s supposed t o be t he f i duci ar y l ooki ng at t he
of f er . And l et ' s l ook at - - we t i e hi mdi r ect l y t o t he " Val eant
i s Vi l e" deck, Your Honor , i f we coul d pl ay t hat cl i p.
MR. HOLSCHER: And what does t he l ead di r ect or of
Al l er gan say about t hi s? Not l ead di r ect or . Thi s i s t he out si de
di r ect or Mr . Pr oct or . Thi s i s not Val eant speaki ng. Thi s i s not
someone we pai d, t hi s i s not an exper t sayi ng t hat vi ol at es your
f i duci ar y dut y. Thi s i s hi s own di r ect or t est i f yi ng. What does
he say about t he conduct of t he execut i ves of Al l er gan t o t r y and
def eat unsol i ci t ed of f er ?
MR. HOLSCHER: Your Honor , t hat ' s t hei r own di r ect or .
They have l ost t hei r way, Your Honor . To f i ght t hi s unsol i ci t ed
of f er as f i duci ar i es you ar e supposed t o val ue i t . I nst ead,
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t hey' r e at t acki ng i t . They can' t come t o you, Your Honor , f or
ext r aor di nar y r el i ef t o st er i l i ze vot i ng t he shar es t hat we
bought .
I f I coul d br i ef l y put up Sl i de 38, t he hur dl es char t . I
won' t spend much t i me, Your Honor . I ' ve pr oven t o you t her e i s no
i r r epar abl e har mf r omt hei r own di r ect or ' s t est i mony. I have
est abl i shed, Your Honor , t hat PS Fund 1, i t woul d ser ve t he publ i c
vot e. That ' s t he shar ehol der s. That ' s I SS. I have pr oven t o you
t her e woul d be no har m, i r r epar abl e har mi f we vot e.
I won' t go t hr ough al l t he st eps, Your Honor , but i t ' s
si x st eps down t he r oad f or some change of cont r ol f r omt hi s
December vot e. We have expl ai ned Brody's on al l f our s. Ther e i s
no st andi ng i f you' r e not a cont empor aneous pur chaser .
My abl e col l eague has gone t hr ough why t her e i s no
subst ant i al st eps. We have al so expl ai ned co- of f er . Hi s act ual
document shows t hey wer e co- of f er or s. The SEC i ndi cat ed t hey wer e
co- of f er or s.
We have wal ked t hr ough, Your Honor , t he 76 di scl osur es,
t he 1500 pages. Ther e i s no need f or di scl osur e her e. I have
j ust pr oven t o you, Your Honor , t hey have uncl ean hands.
Your Honor , t hey need t o sat i sf y al l of t hese and t hey
sat i sf y none.
THE COURT: Why don' t you j ust vi si t among your sel ves
f or a moment . Let me l ook back at my not es f r ombot h si des'
ar gument f or a moment . Ever ybody can conver se i n cour t . I ' mnot
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concer ned. J ust gi ve me a f ew moment s t o r ead.
(Brief pause in proceedings)
THE COURT: Al l r i ght , counsel . I ' mgoi ng t o save you
one r ecess so t hat your r ebut t al can be mor e meani ngf ul f or a f ew
of t he quest i ons I mi ght have and I ' l l r eser ve some ot her s.
So i f you ar e r eady t o wr i t e f or a moment , you can car t e
bl anche go t hr ough a whol e l i t any agai n of wel l - pr epar ed ar gument
and I woul d wel come t hose of cour se and I ' mnot goi ng t o cut you
of f . But when I was pr act i ci ng, i f a j udge had a quest i on, I
t r i ed t o r espond t o i t succi nct l y and t o t he poi nt .
I want t o st ar t wi t h Exhi bi t 37 f or a moment t hat t he
def ense says t hat t hey' r e gui ded by t hr ough t he SEC. And I don' t
have my magni f yi ng gl ass out , but I ' d l i ke t o l ook and have you
r ead t o me t he mont h and t he dat e, because t hat appear s t o be J ul y
2014. So when you come back, answer f or me why you t hi nk t hi s
supposed gui dance t hat you showed me i n Exhi bi t 37 dat ed J ul y 2014
answer s t he al l eged conduct t hat Al l er gan accuses you of f r om
May 25 t hr ough Apr i l . Because t he i mpor t of your ar gument i s t hat
we had no choi ce but t o f ol l ow t he SEC' s gui del i nes and t hei r
co- bi dder st at ement .
Do bot h of you agr ee t hi s i s an obj ect i ve st andar d t est ?
J udge Rakof f , I ' mgoi ng t o ki d my col l eague a l i t t l e bi t on t he
East Coast , mi ght t hi nk i t ' s obj ect i ve. But obj ect i ve st andar d,
counsel , yes or no? Counsel , you don' t have t o st and up. Counsel
on behal f of Al l er gan.
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MR. WALD: Yes, Your Honor .
THE COURT: Counsel ?
MR. FRAWLEY: Your Honor , t he r ul e says par t i al l y
obj ect i ve.
THE COURT: Yes or no?
MR. FRAWLEY: No.
THE COURT: Okay. Why?
MR. FRAWLEY: Because t hat t est i s i nt endi ng t o eval uat e
when a deci si on was made.
THE COURT: So do you bel i eve i t ' s obj ect i ve? What case
l aw do you have t o suppor t t hat ?
MR. FRAWLEY: The r ul e i t sel f says i t i s par t i al l y
obj ect i ve. I don' t bel i eve t her e ar e cases addr essi ng t hi s poi nt .
THE COURT: Thank you. I bel i eve, but I may be wr ong
and you can ar gue t hi s t o me, bot h of you seemt o agr ee t hat even
t hough " of f er i ng per son" i s wr i t t en i n t he si ngul ar , i t ' s possi bl e
f or mul t i pl e per sons t o act t oget her as co- of f er i ng per sons.
Ot her wi se, t her e mi ght be or woul d be absur d r esul t s such as a
cor por at i on not bei ng abl e t o use i t s whol l y- owned subsi di ar y t o
st ar t buyi ng a t oehol d.
The pr obl emi s when t he t wo co- of f er i ng per sons ar e not
cl osel y r el at ed and when t hey t ake on di st i nct r ol es i n car r yi ng
out pl ans f or a t ender of f er . And t her e does not appear t o be l aw
on what char act er i st i cs a per son has t o have t o be a co- of f er i ng
per son.
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So on behal f of Al l er gan, when you come back, I ' mgoi ng
t o ask you t he f ol l owi ng quest i ons and get a, hopef ul l y, succi nct
r esponse. Why shoul dn' t t hi s cour t j ust adopt t he def i ni t i on of
" co- bi dder " f r omr egul at i on 14D? By t he way, when I pause, I ' m
not aski ng f or an answer now. I ' mcol l ect i ng my t hought s t o save
you each a l i t t l e bi t of t i me i n your ar gument s. So I don' t wi sh
t o engage i n conver sat i on r i ght now unl ess I ask f or i nput .
The SEC hasn' t seen f i t t o def i ne who a co- of f er i ng
per son mi ght be. Won' t i t cr eat e a l ot of conf usi on t o say t hat
someone who i s a co- bi dder , f or di scl osur e pur poses, mi ght not be
a co- of f er i ng per son f or r ul e 14e- 3 pur poses? And how woul d you
di st i ngui sh bet ween a co- bi dder f or r egul at i on 14D pur poses and a
co- of f er i ng per son f or r ul e 14e- 3 pur poses?
For t he col l ect i ve def endant s, l et ' s hypot het i cal l y - -
or l et ' s assume t hat pl ai nt i f f s ar e r i ght , t hat gener al l y
" co- bi dder s" shoul d be def i ned br oadl y whi l e " co- of f er i ng per sons"
shoul d be def i ned nar r owl y. How woul d you di st i ngui sh bet ween a
co- bi dder f or r egul at i on 14D pur poses and a co- of f er i ng per son f or
r ul e 14e- 3 pur poses?
The l onger you t ake wi t h t hat answer , t he l ess
cr edi bi l i t y you ar e goi ng t o have f or me. I n ot her wor ds, you ar e
unl i mi t ed i n t er ms of r ebut t al , but conci seness now and pr eci si on
i s what I ' ml ooki ng f or . And i f you j unk up your answer , wel l ,
I ' l l l eave t hat t o your wi sdom. You have been war ned.
For Al l er gan, I have a ser i es of quest i ons and t hen a 02: 11
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ser i es of quest i ons al so f or t he col l ect i ve def endant s. I f t hi s
cour t f i nds t hat you have not r ai sed ser i ous quest i ons as t o r ul e
14e- 3 cl ai m, shoul d t he def endant s be r equi r ed t o make any
cor r ect i ve di scl osur es pur suant t o r ul e 14a- 9?
And not i ced I pause t o gi ve you a chance t o wr i t e t hat
down. You have i t ?
MR. WALD: Yes.
THE COURT: I want t o come back t o t hi s quest i on of
st andi ng. How does ei t her Al l er gan or Ms. Pr aschauer have
st andi ng t o seek an i nj unct i on agai nst PS Fund 1 vot i ng al t oget her
even i f PS Fund 1 makes di scl osur es?
The case l aw hol di ng t hat an i ssuer l i ke Al l er gan has
st andi ng under t he Wi l l i ams Act al l seemt o i nvol ve i ssuer s
pr ot ect i ng t hei r shar ehol der s f r ommi sl eadi ng st at ement s. Her e,
you ar e aski ng t he cour t t o enj oi n PS Fund 1 f r omvot i ng
al t oget her i n December even i f PS Fund 1 makes cor r ect i ve
di scl osur es. And I ' mgoi ng t o ask you t o once agai n speci f i cal l y
and conci sel y addr ess why Al l er gan has st andi ng t o do t hat .
The next quest i on I have concer ns shar ehol der s, and t hat
i s, does a cur r ent shar ehol der have st andi ng t o ask f or a f el l ow
shar ehol der t o be enj oi ned f r omvot i ng al t oget her even i f t hat
f el l ow shar ehol der al l egedl y vi ol at ed secur i t i es l aws?
Next quest i on f or Al l er gan. What l egal aut hor i t y i s
t her e t hat havi ng di r ect or s r emoved, even si x of t hem, i s an
i r r epar abl e har mt o a cor por at i on or t o a cur r ent shar ehol der ?
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For Per shi ng Squar e, Val eant , and PS Fund 1, why di d
def endant s use t he t er m" co- bi dder ent i t y" i n t hei r Febr uar y 25,
r el at i onshi p agr eement i f t hey wer en' t pl anni ng a t ender of f er at
t hat t i me? And why di dn' t you di scl ose - - and I don' t mean you
per sonal l y, counsel - - but t he def endant s di scl ose i n t hei r pr oxy
sol i ci t at i on t hat under t he Febr uar y 25 r el at i onshi p agr eement ,
Val eant and Per shi ng Squar e agr eed t o be cal l ed co- bi dder s?
And assumi ng t hat pl ai nt i f f s have st andi ng t o seek
i nj unct i ve r el i ef , i f t he cour t f i nds t hat Al l er gan' s r ai sed
ser i ous quest i ons as t o t he mer i t s of t he r ul e 14e- 3 cl ai m, why
shoul dn' t t hi s cour t enj oi n PS Fund 1 f r omvot i ng i t s i l l - got t en
shar es?
The l ast quest i on - - wel l , I have many ot her quest i ons
goi ng t hr ough my not es, but I haven' t had t i me t o go t hr ough t hem
t hor oughl y. I f I have quest i ons af t er your r ebut t al t oday, I ' l l
send you a message and get some addi t i onal br i ef i ng. But you ar e
not t o cont act t he cour t and you ar e not t o gi ve me suppl ement al
br i ef l y f r omt hi s poi nt f or war d unl ess asked by t hi s cour t t o do
so.
I want t o t ur n back t o t he hol i st i c vi ew of what I t hi nk
t hat t he Wi l l i ams Act was desi gned t o do, and t hat was i t was
desi gned t o pr ot ect shar ehol der s. When we get i nt o t he equi t abl e
mudsl i ngi ng t hat ' s goi ng on bet ween t he par t i es bef or e t hi s cour t ,
you ar e goi ng t o have t o expl ai n t o me why, under t he Wi l l i ams
Act , i t mat t er s concer ni ng equi t abl e or i nequi t abl e conduct ,
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especi al l y as i t appl i es t o mer ger s. You have t o t i e t hat t o
shar ehol der s under t he Wi l l i ams Act .
So I j ust encour age you once agai n when you come back,
t o keep t he Wi l l i ams Act i n mi nd because my t ent at i ve vi ew i s t hat
my f ocus i s t o be on t he i nnocent shar ehol der , i f you wi l l . I f
I ' mwr ong, I want you t o cor r ect me and ci t e l aw why I ' msupposed
t o be i nvol ved and why t he Wi l l i ams Act i nvol ves mer ger s, whi ch i s
wher e t hi s seems t o be goi ng, t he l ast par t of t he ar gument s.
Now, I don' t car e how l ong you t ake t o col l ect your
t hought s. I f you' d l i ke hal f an hour , i f you' d l i ke f our hour s,
i t doesn' t mat t er t o me. So why don' t you t wo get up out of your
chai r s, l ead counsel , and go di scuss how much t i me you woul d l i ke
t o pr epar e, wor k out an equi t abl e t i me f r ame bet ween t he t wo of
you because t he def endant s t ook a l i t t l e bi t mor e t i me, and t hen
I ' l l come back and l i st en t o your concl udi ng ar gument s.
MR. WALD: Thank you, Your Honor . Woul d 30 mi nut es wor k
f or you?
THE COURT: Anyt hi ng wor ks f or me, counsel . Four hour s
wor k f or me. Doesn' t mat t er .
MR. FRAWLEY: 30 mi nut es, Your Honor .
THE COURT: For bot h of you. Thi s i sn' t di vi ded agai n.
15 mi nut es each.
MR. FRAWLEY: I ' msor r y. 30 mi nut es we' l l have an
answer .
THE COURT: No. Ti me out . 30 mi nut es f or t hi s si de, 30 02: 17
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mi nut es f or t hat si de, or you can have an hour f or t hat si de and
an hour f or t hat si de. I don' t car e.
MR. HOLSCHER: We agr ee, Your Honor . I t hi nk what we' r e
sayi ng i s I t hought you wer e aski ng how l ong a br eak. They want ed
30 mi nut es. We' r e f i ne wi t h t hat . Wi t h r espect t o t he t i me we' r e
goi ng t o t ake, we' r e goi ng t o t ake l ess t han t hem.
THE COURT: No, no, no. Now we' r e goi ng t o get some
t i me. I know l ast t i me we wer e goi ng t o be about an hour and a
hal f .
MR. HOLSCHER: We' r e goi ng t o t ake l ess t han a hal f
hour , Your Honor .
MR. WALD: Pr obabl y t ake an hour , Your Honor .
THE COURT: Okay. You coul d have mor e t i me t han hal f an
hour . You di dn' t go over t hat l ong. Keep i t ar ound 45 mi nut es
t hen. About an hour , counsel ?
MR. WALD: I t hi nk so, Your Honor .
THE COURT: That ' s f i ne.
MR. WALD: I t may be l ess.
THE COURT: 45 mi nut es?
MR. HOLSCHER: Or l ess, Your Honor .
THE COURT: 45 mi nut es or l ess. See you i n hal f an
hour . Thank you.
( Recess t aken, f r om2: 18
(Whereupon there was a change in reporters and DEBBIE GALE
reported the VOLUME 3 session.)
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-oOo-

CERTIFICATE

I hereby certify that pursuant to Section 753, Title 28,
United States Code, the foregoing is a true and correct transcript
of the stenographically reported proceedings held in the
above-entitled matter.

Date: OCTOBER 29, 2014

/S/
______________________________
MARIA BEESLEY, RPR, RMR
OFFICIAL COURT REPORTER

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Maria
Beesley
Digitally signed by Maria Beesley
DN: cn=Maria Beesley, o, ou,
email=amaria1957@yahoo.com,
c=US
Date: 2014.10.29 23:46:43 -07'00'

Allergan Oct. 28, 2014 v2 - Certified

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Allergan Oct. 28, 2014 v2 - Certified

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MARIA BEESLEY, OFFICIAL REPORTER, CSR, RMR

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