New York - Powerful Wall Street activist Bill Ackman on Tuesday warned Botox-maker Allergan against reported plans to buy Salix Pharmaceuticals, which could spoil the hostile Ackman-Valeant bid to buy Allergan.
Ackman, head of Pershing Square Capital Management, said the possible Salix deal "would directly contradict" pledges by Allergan's board to permit its shareholders to vote on the earlier offer by Canada's Valeant Pharmaceuticals.
"By undertaking an acquisition without a shareholder vote, with the purpose and desired effect of frustrating a Valeant transaction, you are breaching your commitment that shareholders would have a vote on the value proposition offered by Valeant," Ackman said.
"If you take such action we will immediately bring litigation against you."
Ackman is Allergan's biggest shareholder with 9.7%, and has lined up Pershing Square behind Valeant in its thrice-rejected effort to take over Allergan.
Ackman's letter came after the Wall Street Journal reported late Monday that Allergan was in advanced talks to buy Salix in a deal likely valued above $10bn.
The report, which cited unnamed sources close to the talks, said a Salix purchase would make Allergan too big and complicated for Valeant to buy.
In June Allergan rejected the most recent Valeant offer worth $53.5bn as insufficient and detrimental to the company's long-term interests.
Ackman and Valeant subsequently called for a shareholder vote to oust a majority of the Allergan board, which is scheduled for December 18.
In early trade Tuesday, Allergan rose 2.7%, Valeant gained 1.1% and Salix jumped 6.0%.