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VRX - Valeant Pharmaceuticals International Inc.

giofranchi

By giofranchi
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Liberty Newbie

Liberty

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http://blogs.wsj.com/pharmalot/2014/08/01/allergan-claims-valeant-and-ackman-violated-insider-trading-laws/

 

UPDATE: Ackman just sent us this statement: "This is a shameless attempt by Allergan to delay the shareholders’ fundamental right to call a special meeting and vote their shares.  Allergan is threatened by our progress toward calling the special meeting. This scorched-earth approach is further evidence of the board’s and management’s entrenchment.”

 

And Pershing adds that "Allergan’s true purpose in bringing the litigation is an attempt to interfere with shareholders’ efforts to call a special meeting.  That purpose is made clear in a separate letter Allergan sent today to the Delaware Court of Chancery."  In that letter, he notes, Allergan says its bylaws provide that the corporate secretary ‘shall consider ineffective’ any special meeting requests that are ‘made in a manner that involved a violation of Regulation 14A under the Exchange Act, or other applicable law.”

 

And Valeant chief executive Michael Pearson has this to say in the same statement: "We are disappointed that Allergan continues to stand in the way of its shareholders right to voice their views on a transaction with Valeant."

 

They would also delight in telling you that one of the law firms now advising Allergan, Wachtell, Lipton, Rosen & Katz, last spring issued a memo saying the maneuvering by Valeant and Ackman did not constitute insider trading. As previously noted, another law firm, Cleary, Gottlieb, Steen & Hamilton, also issued a position paper declaring there was no violation of insider trading laws.

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original mungerville Newbie

original mungerville

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Around the time the pursuit of Allergan was announced, I had it as my largest position, then I had cut it in half, and then cut it to zero on the basis that there might be a good chance the price would come down (given the high debt, non-GAAP earnings, complicated story to some, bad spin from Allergan, etc.). Looks like the price has indeed come down so I guess I better start buying.

 

Congrats, looks like you timed things right, but be careful with those kinds of manoeuvres if it's a company you really like that you want to hold for the long term. If something had happened that had suddenly made the AGN acquisition very likely to happen, you might have missed your window.

 

You are right about these manoeuvres being somewhat risky, however it seems the market offers up opportunities like this frequently. I have been eyeing three investments: VRX, CKI.TO and ALS.TO. In the past 6 months, all three have became cheaper than I would have expected at various points in time - and this in a relatively flat market. Its weird, but I guess this is just further evidence that Mr. Market really is our friend.

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Liberty Newbie

Liberty

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You are right about these manoeuvres being somewhat risky, however it seems the market offers up opportunities like this frequently. I have been eyeing three investments: VRX, CKI.TO and ALS.TO. In the past 6 months, all three have became cheaper than I would have expected at various points in time - and this in a relatively flat market. Its weird, but I guess this is just further evidence that Mr. Market really is our friend.

 

You're absolutely right, I see it happen all the time when I'm not doing anything.

 

As soon as I decide to buy or to wait or whatever, things go against me everytime... Maybe it's just my curse  :-[

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peter1234 Newbie

peter1234

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And Valeant chief executive Michael Pearson has this to say in the same statement: "We are disappointed that Allergan continues to stand in the way of its shareholders right to voice their views on a transaction with Valeant."

 

Amazing that they want to prevent the owners to vote. Don't the shareholders own the company?

 

???

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cayale Newbie

cayale

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And Valeant chief executive Michael Pearson has this to say in the same statement: "We are disappointed that Allergan continues to stand in the way of its shareholders right to voice their views on a transaction with Valeant."

 

Amazing that they want to prevent the owners to vote. Don't the shareholders own the company?

 

???

 

Well, at this point arbitrageurs own the company.  Different than "long-term" shareholders, which have practically ceased to exist.

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Liberty Newbie

Liberty

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Well, at this point arbitrageurs own the company.  Different than "long-term" shareholders, which have practically ceased to exist.

 

Long-term owners who sell are no longer long-term owners. If they sold, it's probably because they know AGN isn't worth what it's going for now as a standalone, so that also tells you something.

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Liberty Newbie

Liberty

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http://in.reuters.com/article/2014/08/05/allergan-ackan-idINL2N0QB00G20140805

 

Proxy advisory firm Glass Lewis on Monday suggested that Allergan Inc shareholders join hedge fund manager William Ackman in calling for a special shareholder meeting.

 

In a report issued to clients, the firm said that shareholders should fill out the paperwork required by Botox maker Allergan for anyone who would like to call for a special shareholder meeting.

 

http://www.bloomberg.com/news/2014-08-05/allergan-being-obstructive-in-deal-defense-firm-says.html

 

Allergan’s “cumbersome” set of bylaws “casts a rather dubious light on the seriousness of the board’s desire to be responsive to investors,” said Glass Lewis & Co in a report to clients today. The company’s recommendations on proxy fights are often followed by investors.

 

“This obstructive process echoes a trend of recalcitrant adherence to progressive corporate governance standards at Allergan,” Glass Lewis said.

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Mungerville Newbie

Mungerville

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This reminds me a lot of Fairfax 12 years ago: GAAP earnings and combined ratio not representative of underlying earnings and run-rate combined ratio we see today, business model flawed, lots of noise from shorts (in this case, lots of noise from Allergan), lawsuits, etc etc

 

This is why I thought the stock would likely get cheaper - maybe it was dumb luck or maybe it was experience, or maybe it was some combination of the two.

 

If the stock market tanks now, VRX could get even cheaper. Lets hope it does.

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rpadebet Newbie

rpadebet

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Picked up a small position yesterday. Swapped some AAPL for VRX. Anyone else adding here?

 

My thesis is pretty simple

1. Jockey Stock - like Mike Pearson, but trust ValueAct and their model. So its a bet on the guys who selected the jockey  :)

 

2. High financial leverage - love this in this environment, I don't understand why much bigger and stable companies are not doing the rational thing of levering up. (I actually do understand, but I don't get it! )

 

3. Presence of vocal shorts, complex accounting, hated by others in the industry, hostile takeovers, front page headlines etc -  these things tend it make it somewhat unloved, and loving the unloved has worked out okay for me most of the time.

 

4. Good runway ahead - Shorts keep asking what happens when acquisitions stop, I think that's a valid risk, but I think there is quite a distance to go before they get there. It's a huge sector and the CEO seems flexible enough to find his way through it. If he finds enough durable pharma-consumer assets with decently stable cash flows in the interim, its not inconceivable that this becomes one of those blue chip dividend stocks.

 

I would like this to go lower though. I think high 80's-low 90's would be awesome ;)

 

 

 

 

 

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Guest wellmont

Guest wellmont

Posted
Posted

And Valeant chief executive Michael Pearson has this to say in the same statement: "We are disappointed that Allergan continues to stand in the way of its shareholders right to voice their views on a transaction with Valeant."

 

Amazing that they want to prevent the owners to vote. Don't the shareholders own the company?

 

???

 

Well, at this point arbitrageurs own the company.  Different than "long-term" shareholders, which have practically ceased to exist.

nevertheless they own the stock and should be able to vote at a meeting. I didn't realize that it's now okay to make value judgement about the motives of individual shareholders. arbs tend to vote for shareholder friendly proposals. many of these so called arbs want to be long term shareholders of the combination. simply getting rid of AGN management would create a ton of value.

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Liberty Newbie

Liberty

Posted
Posted

ISS makes its recommendations:

 

http://ir.valeant.com/investor-relations/news-releases/news-release-details/2014/Institutional-Shareholder-Services-ISS-Recommends-Allergan-Shareholders-Call-A-Special-Meeting-Of-Shareholders/default.aspx

 

Some strong stuff in there:

 

In its report, ISS commented on Valeant's and Allergan's business models and track records:

 

"Many of the initiatives [Allergan] has announced, moreover—reducing R&D and SG&A expense, looking at acquisitions—are strategies Valeant has used to enormous success over the tenure of its current CEO. This suggests both that there is merit in these business strategies, if Allergan can choose as wisely and execute as well and as boldly as Valeant —and also, perhaps, that Allergan's relentless criticism of the Valeant business model is rooted less in the conviction Valeant's model is dangerously flawed than in the conviction anything outside of the defensive perimeter should be scorched."*

 

In addition, ISS criticized Allergan's bylaw provisions:

 

"As a response to the deeper question of why Allergan's bylaw constraints were an appropriate response to the shareholder mandate to provide certain governance rights, by contrast, it appears to have been an exercise in concealing what was never worth finding: the Allergan bylaws are far more restrictive than any of the comparator companies the board apparently reviewed, with no discernable advantage for Allergan shareholders. … The risk from which these bylaws "protect" shareholders, to put it bluntly, is the risk that they will be treated as owners, and asked to make serious and important decisions about the future of their company."

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peter1234 Newbie

peter1234

Posted
Posted

ISS makes its recommendations:

 

http://ir.valeant.com/investor-relations/news-releases/news-release-details/2014/Institutional-Shareholder-Services-ISS-Recommends-Allergan-Shareholders-Call-A-Special-Meeting-Of-Shareholders/default.aspx

 

Some strong stuff in there:

 

In its report, ISS commented on Valeant's and Allergan's business models and track records:

 

"Many of the initiatives [Allergan] has announced, moreover—reducing R&D and SG&A expense, looking at acquisitions—are strategies Valeant has used to enormous success over the tenure of its current CEO. This suggests both that there is merit in these business strategies, if Allergan can choose as wisely and execute as well and as boldly as Valeant —and also, perhaps, that Allergan's relentless criticism of the Valeant business model is rooted less in the conviction Valeant's model is dangerously flawed than in the conviction anything outside of the defensive perimeter should be scorched."*

 

In addition, ISS criticized Allergan's bylaw provisions:

 

"As a response to the deeper question of why Allergan's bylaw constraints were an appropriate response to the shareholder mandate to provide certain governance rights, by contrast, it appears to have been an exercise in concealing what was never worth finding: the Allergan bylaws are far more restrictive than any of the comparator companies the board apparently reviewed, with no discernable advantage for Allergan shareholders. … The risk from which these bylaws "protect" shareholders, to put it bluntly, is the risk that they will be treated as owners, and asked to make serious and important decisions about the future of their company."

 

Great find.

 

Glad to see ISS endorsing Allergan owners having a vote and throwing a bit of cold water on their stalling tactics.

 

:)

 

 

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leftcoast Newbie

leftcoast

Posted
Posted

 

If Valeant clinches the deal for Allergan, its shares could rally to $200 based on the potential to cut costs dodge U.S. taxes, Tobin says. If it doesn't go through -- and the odds are rising that it won't -- he sees the stock falling to $70.

 

I hope he's right. Either way. Both scenarios sound pretty good to me.

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