The Allergan CaseAuthor: R. Yazdipour Ph.D.January 1 2015; updated June 15 2015DISCLAIMER and UPDATE: The present case involves three major players as stated in below isa real-life case taking place in late 2014 and continuing albeit in a different direction in 2015.However in this case Allergans story is somewhat modified so that a teaching assignment in theform of the present case could be created. Also for the same reason and from a legal perspective thiscase is rather simplified as this is not a legal case; it is a finance case.UPDATE: Allergan was recently acquired by Actavis: http://www.latimes.com/business/la-fiallergan-sale-to-irish-company-closes-story.htmlR. Yazdipour Ph.D. February 2015**************************************************A Notes to All Students.1. As a team of soon-to-be Finance MBAs who have especially learned the key tenets andapplications of Behavioral Finance in this class consider the following information regardingAllergan and answer the specific questions that follow. Let me also add that this is a GroupAssignment so wherever in here I use the word you and/or your I usually mean you as aGroup/Team in this assignment. This also means you as a member in your assigned Group are expected to completely work with your team mates and do your acceptable share of work;acceptable to your assigned Group and acceptable to me as your instructor/coach. Individualgrades may be different from Group grades to account for what I just stated.2. As stated in above Allergan was acquired by Actavis and sale was finalized in early 2015.However the focus of this case and focus of your analysis for this case is on the timeperiods when Allergan was still an independent company and was fighting not to beacquired by Valeant Pharmaceuticals and Hedge fund Pershing Square as describe inPart 1 in below.THE ALLERGAN CASE ASSIGNMENTPART 1. Background and a Brief Description of the Assignment. The law firm of LABC in LosAngeles has hired you as a consultant to utilize and apply especially your knowledge of BehavioralFinance in a legal case it is currently handling; the Allergan Case (AGN) as described in in thisassignment and as you can learn more about it via this URL: http://www.allergan.com/home . Youremployment contract however specifies that you will work with AGNs in-house legal departmentand under the direct supervision of its managing attorney Ms. Jennifer Brown. The reason forplacing you at AGN is an operational reason; it makes it easy for you to have access to anyauthorized corporate information as well as access to the senior management; all under directsupervision of Ms. Brown. .Specifically LABC is preparing to challenge in court the hostile takeover of Allergan by twoacquirers that reportedly continue to work with each other to take control of the biotech company;1 The Allergan Case; Author: R. Yazdipour Ph.D.; Copyright © 2015they are Valeant Pharmaceuticals International Inc VRS:http://finance.yahoo.com/q/pr?s=VRX Profile and its reported partner Hedge fund Pershing SquareCapital Management:http://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=12722532 .Moreover LABCs legal defense includes but not limited to disqualifying both hostile suitors usingany legal manner applicable and possible. Defense strategies can be envisioned and finalized forpossible use under two categories Legal Arguments and Financial/Economic Arguments. For thepurpose of this assignment lawyers would provide the purely legal arguments; so you do not need tobe concerned about the legal issues of the case. Instead you will research prepare and present inneeded details to Ms. Brown a set of financial/economic arguments that she could submit to LABCas part of LABCs legal arguments against the two hostile suitors.PART II. More on the Financial/Economic Arguments. First and for clarification purposes Financial/Economic Arguments can be drawn from both the Traditional Finance (TF) theories andconcepts/models; as well as the Behavioral Finance (BF) theories and concepts/models. BF refers toall knowledge that you have learned as a result of taking this class and by the time of the submissionof this assignment. TF refers to other finance knowledge that you have learned outside of this class.Examples for TF knowledge include Market Efficiency CAPM Shareholder MaximizationStakeholder Maximization etc. Examples for BF Prospect Theory and especially the way it providesa human-based framework for decision making by all individuals especially in the business world. Iemphasize the Human Factor which if you think about it you will find it is one of the two mainfactors in any Wealth Creation attempt by us; the other being Capital. The human side of yourarguments may in fact tilt the judges and jurors decisions in any M&A litigation case involvingM&As and especially hostile takeovers like the present case- Allergan. So if there is a challenge inthis assignment is what I just mentioned:A. Researching;B. Preparing; and at the end C. Presenting financial/economic arguments that center around both the Human and Capitalfactors that are the two main building blocks of Value or Wealth.And remember the main goal of any corporation is Wealth or Value Creation and not Destruction.PART III. The Assignment- what you need to do and what to submit. Well the above as clearlystated in the form of A B and C is your assignment. In other words prepare and submit for gradinga set of Financial/Economic arguments that can be used by AGN in the court of law and asrepresented by your employers the LABC law firm.SUBMISSION. Follow all instructions related to the Group Project component of your syllabus andsubmit. Page Limit: 10 pages double-spaced Times New Roman size 12. There is no limit onAppendix.END.
