Allergan Investors Vote for ‘Poison Pill’ Re-Evaluation

Allergan Inc.’s shareholders voted Tuesday to have directors rethink a policy enacted in 1989 to discourage any attempt to take over the company.

Kurt Schacht, the investor who proposed that Allergan drop its “poison pill” defense, said at the pharmaceutical company’s annual meeting that he knows of no buyers interested in the company--but that is not the point. What he is seeking, he said, is more leverage for shareholders to ensure that management acts in their best interest.

Such devices, he said, “can be used as a way to entrench underperforming management.”

Schacht is director of investor responsibility programs for the State of Wisconsin Investment Board, which manages public pensions. The board controls about 2.4% of Allergan’s stock.

Schacht said he has been systematically challenging shareholder-rights policies at corporations in which his board has invested. He announced in October that he would propose a change at Allergan.

A poison pill is a defensive measure that makes acquisition of a company’s stock prohibitively expensive for any party attempting a takeover.

Allergan’s management contends that eliminating the poison pill would expose the corporation to a potential takeover at a price less than management could negotiate. The shareholders, however, voted to have the directors consider submitting the anti-takeover plan for investor approval every three years.

William C. Shepherd, Allergan’s president and chief executive, said experts are working with the board to examine the policy.

The poison pill was one of two shareholder issues brought up at Tuesday’s meeting, held at the company’s Irvine headquarters. The other, a proposal that shareholder votes be kept confidential from management, was rejected.

Its proponent was Allergan stockholder Randell Young, owner of several properties including Randell’s nightclub in Santa Ana. He said managers’ access to ballots allows them to bring pressure on shareholders whose votes might go against their wishes. Young said his proposal was part of a shareholder education process, however, and that he didn’t expect to win.

Allergan, which makes therapeutic skin- and eye-care products, was formed in 1989 as a spinoff from British pharmaceuticals giant SmithKline Beecham. For its latest fiscal year, Allergan had a profit of $103.6 million on revenue of $897.7 million. It employs about 5,160 people worldwide.

Shareholders raised the point Tuesday that the company’s stock price, which closed Tuesday at $24.75 a share, has changed little in the last four years.

Shepherd argued, though, that measuring the company’s success by its stock price is a mistake. In late 1990, he pointed out, the stock traded as low as $17 a share.

“I can’t fix 1989,” Shepherd said in an interview after the meeting. “We have made a very significant return in the past three years.”

Stock prices in the pharmaceuticals industry in general, he said, have fallen 30% to 35% since the end of 1991.

Steady Performance Allergan’s share price has remained fairly level for the past year. Closing stock price, final Friday of each month: Tuesday’s close: $24.75

Allergan at a Glance:

Business: Makes eye-and skin-care products

Headquarters: Irvine

1992 revenue: $897.7 million, up 7%

First-quarter profit: $23.7 million, up 34%

Employees: 5,158

In Orange County: 1,600

CEO: William C. Shepherd

Source: Allergan; Researched by JANICE L. JONES / Los Angeles Times