original mungerville Posted April 23, 2014 Share Posted April 23, 2014 This is a buy. A large cap like this should reprice within 2 years - which means if they bag it, something like 20% compounded gains over 2 years. And the longer term doesn't look that bad either! What do their debt maturities look like? Are they longer-term or are they financing these acquisitions short-term despite the very low yields on corporate debt currently? Link to comment Share on other sites More sharing options...
giofranchi Posted April 23, 2014 Author Share Posted April 23, 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 Is $9.5 your estimate or was this number mentioned by VRX? the slides suggest $10.75 pro forma 2014 cash eps (can someone verify?) $9.5 was nothing but a (conservative) guess of mine… If the actual number is $10.75, yesterday I almost doubled my investment in VRX at a multiple of 12.5x. Extremely difficult to find such a high quality company trading at such a low multiple in today’s market! ;) Gio Link to comment Share on other sites More sharing options...
fareastwarriors Posted April 23, 2014 Share Posted April 23, 2014 Found it: http://www.sec.gov/Archives/edgar/data/885590/000119312514152949/d714482d425.htm Mr Ackman doesn't do short powerpoints does he... Link to comment Share on other sites More sharing options...
giofranchi Posted April 23, 2014 Author Share Posted April 23, 2014 the EPS growth rate is projected at mid teens. they get there by allocating free cash flow and managing costs---Acquisitions, debt reduction, share repurchases, and ringing costs out of the system are in the tool kit. the company has grown earnings from $1 to $8 in a handful of years. So management knows how to create per share earnings growth. Down the road you could easily see it broken up via spin offs or division sales. Yes! This is exactly how I look at VRX's future sources of value creation too! wellmont imo is always right on the spot! ;) Gio Link to comment Share on other sites More sharing options...
LC Posted April 23, 2014 Share Posted April 23, 2014 I feel like these guys are the Walmart of pharma. Assemble a varied stable of product and wring every cost out of the system that is possible. Link to comment Share on other sites More sharing options...
Phaceliacapital Posted April 23, 2014 Share Posted April 23, 2014 http://www.ft.com/intl/cms/s/0/15ad48ec-ca8f-11e3-bb92-00144feabdc0.html?siteedition=intl#axzz2zgpyvaWp Allergan moved swiftly to stifle an unsolicited $48.1bn takeover approach from rival Valeant Pharmaceuticals and activist investor Bill Ackman, adopting a poison pill defence. The group, which produces wrinkle treatment Botox, said late on Tuesday that it was adopting a shareholder rights plan that would give its existing holders increased voting power should any investor acquire over 10 per cent of its stock. Link to comment Share on other sites More sharing options...
Guest Dazel Posted April 23, 2014 Share Posted April 23, 2014 Ackman and Pearson were on CNBC a few minutes ago....very good interview. Link to comment Share on other sites More sharing options...
giofranchi Posted April 23, 2014 Author Share Posted April 23, 2014 Valeant Pharmaceuticals Announces Nominations For Board Of Directors http://ir.valeant.com/investor-relations/news-releases/news-release-details/2014/Valeant-Pharmaceuticals-Announces-Nominations-For-Board-Of-Directors/default.aspx Gio Link to comment Share on other sites More sharing options...
Phaceliacapital Posted April 23, 2014 Share Posted April 23, 2014 So Mason is out. http://video.cnbc.com/gallery/?video=3000269596 Link to comment Share on other sites More sharing options...
Phaceliacapital Posted April 23, 2014 Share Posted April 23, 2014 This is actually incredible dealmaking. - Valeant wants to buy Allergan, they team up with Ackman who buys a 10 % stake. Upside Scenario: The deal closes, they get their value platform and all the other bells and whistles and can execute their outlined strategy. Downside scenario: A white knight appears, offers a higher premium than the one currently offered (let's say around 30 %), prompting Pershing to sell and book a +/- 30% gain on 3bn plus under the partnership agreement Valeant receives 15% of that gain. Quite the """downside""". Link to comment Share on other sites More sharing options...
original mungerville Posted April 23, 2014 Share Posted April 23, 2014 So Mason is out. http://video.cnbc.com/gallery/?video=3000269596 What do you mean? Doesn't seem to be in the video clip. Link to comment Share on other sites More sharing options...
Liberty Posted April 23, 2014 Share Posted April 23, 2014 So Mason is out. Sad to see him go. Based on a few interviews, I have very high regard for his abilities. But the stated reason makes sense, and is probably a sign that Valeant is broadening the net in healthcare, or maybe just looking more at the large caps that ValueAct also looks at. Mungerville: It's announced here: http://ir.valeant.com/investor-relations/news-releases/news-release-details/2014/Valeant-Pharmaceuticals-Announces-Nominations-For-Board-Of-Directors/default.aspx Link to comment Share on other sites More sharing options...
txlaw Posted April 23, 2014 Share Posted April 23, 2014 One of the things that I find really interesting about the VRX story is that the CEO seems to be building a new JNJ from the ground up. I would love to see somebody who is invested in VRX take a look at how JNJ became the way it is and make comparisons -- if any such comparisons are apt. I think when Bruce B invested in PFE during the financial crisis, he was hoping that new management could slowly cut away at the fat and change PFE to become more JNJ-like: better R&D efficiency, focus on maximizing profit from branded generics and OTC "consumer" products, smarter M&A, more decentralized org structure. It never happened; the cultural issues at PFE could never really be overcome. Now, PFE has done a lot of good stuff, including spinning off Zoetis, which is mentioned as a comp in Ackman's presentation, but it is still a pretty inefficient company (at least, last I checked -- haven't been invested in it for a while now). VRX is like what PFE should have become. I wish I had really looked hard into the company when I saw that Sequoia had so much money in it. Link to comment Share on other sites More sharing options...
giofranchi Posted April 23, 2014 Author Share Posted April 23, 2014 I wish I had really looked hard into the company when I saw that Sequoia had so much money in it. I think VRX market cap could be somewhat an issue, but much less of an issue than a lot of people think right now. Much more important imo is that Mr. Pearson still has a 30 years working life in front of him: many tools at his disposal to go on creating value for shareholders. Gio Link to comment Share on other sites More sharing options...
Guest wellmont Posted April 23, 2014 Share Posted April 23, 2014 valueact wants to find the next valeant and put mm on the board. valueact knows that pershing sq will have a board seat and represent shareholders. my guess is that VA won't sell their shares, but who knows. I think they may have a 25 bagger in six years or so. Va could retain a board seat; but probably rightly believes their thinking is in total alignment with vrx CEO/ps. I think the best analogy for vrx is Inbev ---- BUD. Link to comment Share on other sites More sharing options...
Guest wellmont Posted April 23, 2014 Share Posted April 23, 2014 I wish I had really looked hard into the company when I saw that Sequoia had so much money in it. I think VRX market cap could be somewhat an issue, but much less of an issue than a lot of people think right now. Much more important imo is that Mr. Pearson still has a 30 years working life in front of him: many tools at his disposal to go on creating value for shareholders. Gio the interesting thing here is that VRX is still not very well known by most investors, and that includes most large investors. so the discovery process is still ahead of it. This combination will ignite their interest. Big investors need to build a trust relationship with a company before they invest. That's why I think the chance for multiple expansion is great. One the key things I've learned in watching markets for almost 30 years is that the big boys move Slow. We have a huge advantage. Link to comment Share on other sites More sharing options...
Palantir Posted April 23, 2014 Share Posted April 23, 2014 the interesting thing here is that VRX is still not very well known by most investors, and that includes most large investors. so the discovery process is still ahead of it. This combination will ignite their interest. Big investors need to build a trust relationship with a company before they invest. That's why I think the chance for multiple expansion is great. One the key things I've learned in watching markets for almost 30 years is that the big boys move Slow. We have a huge advantage. Not quite. :) Valeant Pharmaceuticals Is a Popular Play Among Hedge Funds http://online.wsj.com/news/articles/SB10001424052702304049904579517774167108880?mg=reno64-wsj&url=http%3A%2F%2Fonline.wsj.com%2Farticle%2FSB10001424052702304049904579517774167108880.html Link to comment Share on other sites More sharing options...
giofranchi Posted April 23, 2014 Author Share Posted April 23, 2014 I think the best analogy for vrx is Inbev ---- BUD. Maybe… Though going on I don’t see all those tools to keep creating value for shareholders at Inbev that I see instead at Valeant. Gio Link to comment Share on other sites More sharing options...
Guest wellmont Posted April 23, 2014 Share Posted April 23, 2014 exactly. Hedge funds and boutique advisors, which are far far smaller as an asset class than the institutions I am talking about, discovered VRX. The fidelity vanguards TRP Franklins State Street, private and public pension funds, and sovereign wealth funds will start kicking the tires if this deal goes through. Link to comment Share on other sites More sharing options...
Palantir Posted April 23, 2014 Share Posted April 23, 2014 ^Fair enough. Link to comment Share on other sites More sharing options...
Liberty Posted April 23, 2014 Share Posted April 23, 2014 I'm no expert on poison pills, but I found these paragraphs from Wikipedia interesting: It was reported in 2001 that since 1997, for every company with a poison pill which successfully resisted a hostile takeover, there were 20 companies with poison pills that accepted takeover offers.[3] The trend since the early 2000s has been for shareholders to vote against poison pill authorization, since poison pills are designed to resist takeovers, whereas from the point of view of a shareholder, takeovers can be financially rewarding. Some have argued that poison pills are detrimental to shareholder interests because they perpetuate existing management. For instance, Microsoft originally made an unsolicited bid for Yahoo!, but subsequently dropped the bid after Yahoo! CEO Jerry Yang threatened to make the takeover as difficult as possible unless Microsoft raised the price to US$37 per share. One Microsoft executive commented, "They are going to burn the furniture if we go hostile. They are going to destroy the place." Yahoo has had a shareholders rights plan in place since 2001.[4] Analysts suggested that Microsoft's raised offer of $33 per share was already too expensive, and that Yang was not bargaining in good faith, which later led to several shareholder lawsuits and an aborted proxy fight from Carl Icahn.[5][6] Yahoo's stock price plunged after Microsoft withdrew the bid, and Jerry Yang faced a backlash from stockholders that eventually led to his resignation. Update: Ackman and Pearson on Bloomberg: http://www.bloomberg.com/video/ackman-we-don-t-want-to-partner-with-everyone-NEpUMgVDSyKndF66WLYG8A.html You can see that Pearson is really not in his element, he probably hates that stuff. Link to comment Share on other sites More sharing options...
LC Posted April 23, 2014 Share Posted April 23, 2014 exactly. Hedge funds and boutique advisors, which are far far smaller as an asset class than the institutions I am talking about, discovered VRX. The fidelity vanguards TRP Franklins State Street, private and public pension funds, and sovereign wealth funds will start kicking the tires if this deal goes through. Fidelity, TRP, TD Bank, JPM all own some Valeant, and I believe Vanguard and SS own some of Allergan, although I agree that this deal puts them in a bigger league and they will get a more serious look from these firms. Link to comment Share on other sites More sharing options...
wbr Posted April 23, 2014 Share Posted April 23, 2014 You can see that Pearson is really not in his element, he probably hates that stuff. But at the same time he probably understands that it is necessary to go public with Ackman and talk about the benefits of this deal to convince Allergan shareholders and put pressure on Allergan management in public. So far I have not seen anything from Allergan management. If they kill this deal without a higher bid from another company, the stock goes back to $110 and then they better a have a good explanation for their actions because the potential backlash could be huge. Link to comment Share on other sites More sharing options...
Liberty Posted April 23, 2014 Share Posted April 23, 2014 You can see that Pearson is really not in his element, he probably hates that stuff. But at the same time he probably understands that it is necessary to go public with Ackman and talk about the benefits of this deal to convince Allergan shareholders and put pressure on Allergan management in public. So far I have not seen anything from Allergan management. If they kill this deal without a higher bid from another company, the stock goes back to $110 and then they better a have a good explanation for their actions because the potential backlash could be huge. Oh yeah, he wouldn't do it if he didn't see the value of it. Such a big hostile takeover requires convincing the shareholders of Allergan and explaining to them why this makes sense, since Valeant does things differently and AGN shareholders can't be expected to all already understand that (though I think that the fact that there's 50% overlap between the two shareholder groups without Ackman's 9.7% is a very good sign). But it's still really not Pearson's thing. At the beginning of the presentation yesterday, he looked at the big room and cameras and everything and said: "I guess this is how it feels to be at big pharma... Bill Ackman is paying for all this, by the way. It'll never happen again, unless someone wants to pay for it again." Link to comment Share on other sites More sharing options...
dcollon Posted April 23, 2014 Share Posted April 23, 2014 Jeff Ubben on CNBC discussing deal Thanks to Value Walk http://www.valuewalk.com/2014/04/jeff-ubben-vrx-agn-perfect-match/?utm_content=quick_link&utm_medium=email&utm_campaign=EMAIL_DAILY&utm_source=mailchimp Link to comment Share on other sites More sharing options...
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