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Wolosky Contributes to Discussion Over Ackman’s Unusual “Shareholder Referendum” Proxy Strategy

May 30, 2014

The Daily Deal reported that activist investor Bill Ackman has commenced a shareholder referendum proxy campaign strategy in connection with Pershing  Square and Valeant Pharmaceuticals’ hostile bid for Allergan. The Daily Deal talked to institutional investors, proxy solicitors, and activist advisors about this approach. Among those contributors to the conversation was Olshan Activist Partner Steve Wolosky, who said “he has considered advising his activist fund manager clients that they might want to hold this kind of shareholder referendum in certain circumstances.” He agreed there is a question about whether institutions will vote to support the nonbinding proposal and he also wonders whether ISS and Glass Lewis will issue a recommendation on it “because it is so unusual.”  Another issue is that some institutions that have shares on loan may not call in their shares for a vote, which could hurt turnout or votes in favor of the dissident. However, it could be useful in situations where a company's bylaws are particularly egregious in limiting action by written consent or special meeting. He added that if it is successful it could put pressure on Allergan's independent directors to negotiate with Valeant. Wolosky concluded, "I think you use it when there is no other viable alternative to get a sense of shareholder sentiment."

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