Liberty Posted April 21, 2014 Share Posted April 21, 2014 Looks like your timing was pretty good, Gio! Link to comment Share on other sites More sharing options...
fareastwarriors Posted April 21, 2014 Share Posted April 21, 2014 I wonder what the guys at Sequoia Fund think of this deal. Link to comment Share on other sites More sharing options...
lu_hawk Posted April 21, 2014 Share Posted April 21, 2014 Once again, as I have often repeated, the only sensible bear case for VRX would be to tell me why its acquisitions are bad businesses, and/or why Mr. Pearson has overpaid for them. Period. Gio Well, I would reply that you have to know where to place the burden of proof. It's too early to tell if VRX's acquisitions have been good ones, as the company has kept growing by making acquisitions using easy credit and there has not been any time for the dust to settle. You can't yet tell if the prior acquisitions have been gone ones, and you probably won't be able to tell until the tide goes out. I think all that anyone really cares about is the stock price over the past couple years, and so they say that the acquisitions must have been good. And so the question is: is VRX a good investment unless the acquisitions can be proven to be bad? Or is VRX a bad investment unless the acquisitions can be proven to be good? One of those questions is silly IMO, and the other one is sensible. Link to comment Share on other sites More sharing options...
Guest Dazel Posted April 21, 2014 Share Posted April 21, 2014 Ackman has $4b or half of his hedge fund in VRX? And is announcing a take over before it has made a bid? What the hell is going on? Dazel. Link to comment Share on other sites More sharing options...
Guest Dazel Posted April 21, 2014 Share Posted April 21, 2014 Gio et all congrats on the bump in price! Looks like we are going to get some "wild" speculation in Pharma. Dazel Link to comment Share on other sites More sharing options...
LC Posted April 21, 2014 Share Posted April 21, 2014 From what limited information we have...looks like another shrewd deal from Mr. Pearson. He is leveraging the activist section of the investment field to do bigger deals on his behalf. Does anyone expect anything other than cost-cutting here? I expect a lot of costs to be "synergized": R&D accounts for 16% of Allergan's revenue. Expect that to go down once Valeant reigns that in. Same with SG&A, which accounts for 41% of sales. Link to comment Share on other sites More sharing options...
Guest wellmont Posted April 22, 2014 Share Posted April 22, 2014 interview with perhaps one of the least promotional CEOs in business today. He looked bored silly... http://www.bloomberg.com/video/valeant-eyeing-dermatology-dentistry-for-m-a-ceo-ebYeh1VBSvS7hjsMlmx6RQ.html Link to comment Share on other sites More sharing options...
siddharth18 Posted April 22, 2014 Share Posted April 22, 2014 Based on the filings it seems Ackman paid around ~$3 billion for the shares/calls and they are worth $4 billion already. http://www.sec.gov/Archives/edgar/data/850693/000119312514150906/0001193125-14-150906-index.htm Link to comment Share on other sites More sharing options...
giofranchi Posted April 22, 2014 Author Share Posted April 22, 2014 Well, I would reply that you have to know where to place the burden of proof. It's too early to tell if VRX's acquisitions have been good ones, as the company has kept growing by making acquisitions using easy credit and there has not been any time for the dust to settle. You can't yet tell if the prior acquisitions have been gone ones, and you probably won't be able to tell until the tide goes out. I think all that anyone really cares about is the stock price over the past couple years, and so they say that the acquisitions must have been good. And so the question is: is VRX a good investment unless the acquisitions can be proven to be bad? Or is VRX a bad investment unless the acquisitions can be proven to be good? One of those questions is silly IMO, and the other one is sensible. lu_hawk, there is only one reason why an investment is a bad one: too high a price. But, today you are paying too high a price for VRX only if results from acquired businesses materially disappoint going forward. That’s why I said: show me the reasons those investments are bad ones! You say it is too early to judge? Well, how could you be bearish then? And, moreover, as investors we try to recognize the value and/or the pitfalls of any investment well in advance they have become obvious to everyone else! That’s what we do. Why, then, not to analyze each single acquisition VRX has made during the last 5 years, and try to judge if it has been wise to purchase that business, or vice versa it has been a foolish move? That’s what I am asking short sellers: analyze each acquisition and show me why most probably it will turn out to be a bad one in the future. Gio Link to comment Share on other sites More sharing options...
giofranchi Posted April 22, 2014 Author Share Posted April 22, 2014 Valeant Proposes to Combine With Allergan for $48.30 in Cash and 0.83 Shares of Valeant Stock for Each Allergan Share http://ir.valeant.com/investor-relations/news-releases/news-release-details/2014/Valeant-Proposes-to-Combine-With-Allergan-for-4830-in-Cash-and-083-Shares-of-Valeant-Stock-for-Each-Allergan-Share/default.aspx Gio Link to comment Share on other sites More sharing options...
giofranchi Posted April 22, 2014 Author Share Posted April 22, 2014 interview with perhaps one of the least promotional CEOs in business today. He looked bored silly... http://www.bloomberg.com/video/valeant-eyeing-dermatology-dentistry-for-m-a-ceo-ebYeh1VBSvS7hjsMlmx6RQ.html Thank you for posting this! And I agree… though, I guess he should get in shape a little bit… Come on, Mr. Pearson, after all you are only 54! ;) Gio Link to comment Share on other sites More sharing options...
Guest Dazel Posted April 22, 2014 Share Posted April 22, 2014 Gio, Looks like Ackman saw what you see....nice work! Dazel Link to comment Share on other sites More sharing options...
giofranchi Posted April 22, 2014 Author Share Posted April 22, 2014 Gio, Looks like Ackman saw what you see....nice work! Dazel Thanks Dazel, Though VRX is a relatively small position for me, much smaller than ALS. ;) Gio Link to comment Share on other sites More sharing options...
Guest Dazel Posted April 22, 2014 Share Posted April 22, 2014 I think that Brian Dalton at Altius will look a lot more like Mr. Pearson in the future as far as acquiring assets along with building them...but you likely already knew that. keep up the good work! Dazel. Link to comment Share on other sites More sharing options...
giofranchi Posted April 22, 2014 Author Share Posted April 22, 2014 I think that Brian Dalton at Altius will look a lot more like Mr. Pearson in the future as far as acquiring assets along with building them...but you likely already knew that. keep up the good work! Dazel. Yeah! I am sort of a monotonous guy… all the companies I invest in look alike! ;) Cheers, Gio Link to comment Share on other sites More sharing options...
Phaceliacapital Posted April 22, 2014 Share Posted April 22, 2014 Soooooooooooooo Allergan: Mcap: 42.4 bn Shares: 299 mn EBITDA: 2.08 bn NI: 1.27 bn FCF: 1.52 bn VRX is offering 48.3 per share = 14.44 bn + 248 mn shares of VRX = 31.5 bn = 46 bn They claim 2.7 cost synergies so improved EBITDA would come in at 4.78 bn, which gives a 9.61x multiple. FCF improves to 4.2 bn which gives a 10.88x multiple. They also indicate that going forward R&D will be "at least" (which I read as "maximum") 300 mn, which is a decline of 70% as Allergan currently spends around 1 bn... Is this already included in their 2.7 figure? Otherwise you are looking at 8.38x and 9.33x.. Which is not that expensive I would say.. Link to comment Share on other sites More sharing options...
Liberty Posted April 22, 2014 Share Posted April 22, 2014 Soooooooooooooo Allergan: Mcap: 42.4 bn Shares: 299 mn EBITDA: 2.08 bn NI: 1.27 bn FCF: 1.52 bn VRX is offering 48.3 per share = 14.44 bn + 248 mn shares of VRX = 31.5 bn = 46 bn They claim 2.7 cost synergies so improved EBITDA would come in at 4.78 bn, which gives a 9.61x multiple. FCF improves to 4.2 bn which gives a 10.88x multiple. They also indicate that going forward R&D will be "at least" (which I read as "maximum") 300 mn, which is a decline of 70% as Allergan currently spends around 1 bn... Is this already included in their 2.7 figure? Otherwise you are looking at 8.38x and 9.33x.. Which is not that expensive I would say.. They don't include the lower tax rate in those synergies ("High single-digit tax rate for combined company in addition to cost synergies"), and I wouldn't be surprised if they kept finding more cost synergies (they always have in the past). I like how it would delever them significantly. Looks quite good to me so far. It's a pretty strong vote of confidence from Ackman too. He does his homework (was probably the only guy apart form Michael Burry who read 10s of thousands of pages of MBS documentation), so making it his biggest investment ever, saying "The combination of Valeant and Allergan represents the most strategic and value-creating transaction I have ever analyzed.", and saying that he intends to take all stock on the deal and "remain a long-term holder of the combined company" is not nothing. Link to comment Share on other sites More sharing options...
giofranchi Posted April 22, 2014 Author Share Posted April 22, 2014 I have just bought more VRX. Gio Link to comment Share on other sites More sharing options...
Phaceliacapital Posted April 22, 2014 Share Posted April 22, 2014 They don't include the lower tax rate in those synergies ("High single-digit tax rate for combined company in addition to cost synergies"), and I wouldn't be surprised if they kept finding more cost synergies (they always have in the past). I like how it would delever them significantly. Looks quite good to me so far. It's a pretty strong vote of confidence from Ackman too. He does his homework (was probably the only guy apart form Michael Burry who read 10s of thousands of pages of MBS documentation), so making it his biggest investment ever, saying "The combination of Valeant and Allergan represents the most strategic and value-creating transaction I have ever analyzed.", and saying that he intends to take all stock on the deal and "remain a long-term holder of the combined company" is not nothing. Yes I wanted to mention the tax part but forgot it... Regarding Ackman, well, everybody talks for their own book so yeah I am not attributing a lot of importance to that... Ballpark EBITDA will be just short of 8 bn I suppose, + debt of 17.3 (existing) + 15.5 (new) - 1.5 (cash from Allergan) - 600 (own cash) = +/- 30.5 = 3.8x EBITDA which is deleveraging of around 36%. Link to comment Share on other sites More sharing options...
cubsfan Posted April 22, 2014 Share Posted April 22, 2014 You gotta love Ubben from ValueAct - he's very consistent in his messaging about acquisitions: http://video.cnbc.com/gallery/?video=3000269124 http://video.cnbc.com/gallery/?video=3000269371 He's a driver for change. Link to comment Share on other sites More sharing options...
giofranchi Posted April 22, 2014 Author Share Posted April 22, 2014 I like the medical aesthetic business very much. If, following this acquisition, VRX revises Cash EPS upward to $9.5 (from $8.5, circa a 12% increase), we are still paying a multiple of 14x. Not bad, given all the prospects for future growth. Gio Link to comment Share on other sites More sharing options...
Christopher1 Posted April 22, 2014 Share Posted April 22, 2014 Ackman in the webcast is saying that Pearson is the next "Outsider" and Mike should be included in the next edition. Link to comment Share on other sites More sharing options...
Guest wellmont Posted April 22, 2014 Share Posted April 22, 2014 You gotta love Ubben from ValueAct - he's very consistent in his messaging about acquisitions: http://video.cnbc.com/gallery/?video=3000269124 http://video.cnbc.com/gallery/?video=3000269371 He's a driver for change. interesting valueact would leave the board.... Link to comment Share on other sites More sharing options...
giofranchi Posted April 22, 2014 Author Share Posted April 22, 2014 Ackman in the webcast is saying that Pearson is the next "Outsider" and Mike should be included in the next edition. Cristoforo, Do you know if Ackman’s presentation is downloadable in pdf format? Thank you, Gio Link to comment Share on other sites More sharing options...
Christopher1 Posted April 22, 2014 Share Posted April 22, 2014 Ciao Giovanni, the presentation is currently ongoing, I suppose at the end of the webcast it will be available in .pdf. Ackman is telling some nice anectodes about Pearson frugality. Link to comment Share on other sites More sharing options...
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