Allergan settled claims with the US Securities and Exchange Commission (“SEC”) for disclosure violations during a hostile tender offer by Valeant Pharmaceuticals International and co-bidder Pershing Square Capital Management.  A public company that is the subject of a tender offer has an obligation to express a position on the tender offer in a Schedule 14D-9.  See Exchange Act Rules 14d-9 and 14e-2.  Additionally, 14D-9 requires the subject of a tender offer to disclose whether or not it has entered into negotiations “in response to the tender offer” that relate to an “extraordinary transaction,” including a merger or acquisition transaction.  After a Schedule 14D-9 is filed, Rule 14d-9(c) obligates the filer to amend the Schedule 14D-9 if any material change occurs.  After responding to Valeant’s tender bid in June 2014, Allergan engaged in potential merger and acquisition talks with Salix Pharmaceuticals and Actavis.  Allergan was required to promptly amend its Schedule 14D-9 to disclose that negotiations were being undertaken or were underway or were in preliminary stages.  The SEC found that Allergan never publicly disclosed its negotiations with Salix Pharmaceuticals.  It further found that Allergan failed to timely disclose its negotiations with Actavis even when pressed by the Commission’s Division of Corporation Finance.  “Allergan failed to fully and timely disclose information about potential merger transactions it was negotiating behind the scenes in response to the Valeant bid.  As outlined in our order, Allergan was slow to act even after SEC staff reminded the company about its disclosure obligations,” Andrew M. Calamari, director of the SEC’s New York Regional Office, said in a news release.  Ultimately, Actavis won the bidding contest for Botox-maker Allergan in a $66 billion mega deal. 

The SEC order can be found here and provides some guidance as to when discussions constitute “merger negotiations” that require disclosure.