By Caroline Humer
(Reuters) - Activist investor William Ackman said on Monday that Allergan Inc's chief executive has a "disabling" conflict of interest because accepting a takeover by Valeant Pharmaceuticals International likely means he would lose his job.
Ackman and Montreal-based Valeant launched a $47 billion (27.9 billion pounds) takeover of the company on April 22, but Allergan rejected the offer on May 12 and has not budged since. Allergan Chief Executive Officer David Pyott is urging shareholders to let the company stand alone.
Valeant, however, said last week it intended to sweeten its offer and would discuss the matter in a May 28 webcast.
Ackman, who controls a nearly 10 percent stake in Allergan as the head of Pershing Square Capital Management, criticized Allergan's position in a May 19 letter to its lead director, Michael Gallagher.
The activist investor said Allergan's board of directors needed to communicate directly with shareholders through the creation of a subcommittee of directors, and he complained that his attempts to speak to the company's top director without management present were rejected.
"The board’s apparent unwillingness to speak or meet with us and your unwillingness to speak with the company’s largest shareholder without Mr. Pyott present are both material failures of Allergan’s corporate governance at a critical time for Allergan and its shareholders," he said in the letter.
"CEO David Pyott has a disabling conflict of interest that arises from the fact that he will lose his leadership role at the company and likely his job as a result of the transaction," Ackman said in the letter.
Allergan reiterated on Monday that the takeover offer was too risky for shareholders and it defended its communications with shareholders. It did not address the issue of Pyott possibly having a conflict of interest.
"Allergan maintains an open line of communication with stockholders and welcomes their feedback. However, as a co-bidder with Valeant Pharmaceuticals, we believe that Mr. Ackman’s views and interests are not aligned with those of other Allergan stockholders," Allergan spokeswoman Bonnie Jacobs said in a statement.
Ackman's letter is his latest effort to try to gain shareholder support for the deal. He said last week he would call an unofficial Allergan shareholder meeting and a vote on support for the deal.
"To me the letter is a very old school public pressure type of approach," BMO Capital Markets analyst David Maris said. "Why would Allergan agree to any further discussions when Valeant has already said they are going to come out with a new bid on the 28th?"
Ackman's letter was disclosed in a regulatory filing with the Securities and Exchange Commission.
Valeant shares were up 0.4 percent at $127.12 on the New York Stock Exchange, while Allergan was down 0.1 percent at $159.83 on the NYSE.
(Reporting by Caroline Humer; Editing by Sofina Mirza-Reid and Paul Simao)