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The Morning Brief: William Ackman Presses Allergan to Listen Up

William Ackman is pressing the health care company Allergan to accept Valeant Pharmaceuticals’ unsolicited takeover offer. In a new, lengthy open letter to Allergan lead director Michael R. Gallagher, Ackman, the founder of Pershing Square Capital Management, which has teamed up with Valeant, expresses concerns about Allergan’s governance practices and asserts that chairman and CEO David Pyott “has a disabling conflict of interest” when determining whether or not to accept the takeover offer, seeing as how he could lose his job. Ackman urged the independent directors to meet with him and Valeant officials, adding: “We strongly urge the independent directors of the board to analyze the revised Valeant proposal with the assistance of independent counsel and advisors, hired by the independent directors rather than by management, who do not have a preexisting client relationship to protect, nor a predisposition against shareholder activism or unsolicited transactions, and who have a strong track record for protecting and enhancing shareholder interests.”
—Although shares of DirecTV fell about 1.77 percent Monday, several hedge funds still stand to profit from AT&T’s deal to purchase the satellite television provider. In the first quarter, Jonathon Jacobson’s Highfields Capital Management held a stake of more than 7.8 million shares of DirecTV worth about $634 million, making it the Boston hedge fund’s fourth largest holding. Of course, this was a fraction of what Warren Buffett’s Berkshire Hathaway has invested; the firm is DirecTV’s largest shareholder with roughly 34.5 million shares. Two prominent hedge funds liquidated their entire holdings of the stock in the first quarter — Patrick McCormack’s Tiger Consumer Management and John Burbank III’s Passport Capital. Even after Monday’s decline, the stock is up nearly 11 percent so far for the second quarter of 2014 and 22.5 percent for the year.
—Another activist hedge fund and major shareholder has criticized Darden Restaurants’ decision to sell its Red Lobster chain. James Mitarotonda, the chairman and CEO of Barington Capital Group, said it was “unconscionable” to sell the division for a “fire sale” price after shareholders clearly indicated that they did not want the company to enter into a transaction unless it was subject to their approval. “While the announced deal reinforces the value of Darden’s vast real estate assets and the benefits of establishing separate brand-focused operating companies, as structured, we believe it destroys more value than it creates. Given the market’s strongly negative reaction to the announcement, it appears that other shareholders are also extremely disappointed by the transaction,” Mitarotonda states in a press release.

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