How much is Bill Ackman running the new Valeant?

MONTREAL – Hedge fund billionaire Bill Ackman has invested in Valeant, publicly defended Valeant and, quickly after joining the company’s board, it seems he’s already having an influence in running Valeant.

In fact, just hours after Valeant Pharmaceuticals International Inc. announced Monday that CEO Michael Pearson would step down, Ackman was by his side addressing a town-hall meeting of just one,000 workers in the drugmaker’s Nj offices, Bloomberg News reported.

“I’m looking forward to dealing with the board to recognize new leadership for Valeant,”  Ackman, CEO of Pershing Square Capital Management, wrote inside a Valeant news release announcing the company’s intent to find a alternative to Pearson.  

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David Tawil, president from the Maglan Capital hedge fund, said that even though it is not unusual for a firm with only a few big investments such as Pershing Square to place a worker on a company board, it requires extraordinary circumstances for that CEO himself by sitting. 

“It really needs to be a very sensitive, very heightened, very important situation for that head from the firm to go forward and speculate around the board of a company,”  Tawil said in an interview.

Pershing Square’s sunk cost in Valeant is really deep as the biggest hedge fund shareholder from the Laval, Que.-based company with more than 21.5 million shares – nine per cent of the total.

Since going for a position within the first quarter of 2015, the fund has on paper lost a lot more than US$2 billion on its position that has progressively brought Ackman deeper and deeper into the embattled company.

What began by having an investment, gone to live in him holding a four-hour-long conference call defending the company when faced with short-seller attacks and has progressed to him now taking an active role in Valeant’s direction. 



“The company’s massive and dominant franchises in eye care, dermatology, GI, along with other therapeutic areas along with its extraordinarily low valuation present a spectacular opportunity for a world-class health care executive,”  Ackman said in news reports release. 

Ackman is sitting on the Valeant board alongside Pershing Square’s vice-chairman, Stephen Fraidin. Fraidin was appointed March 9, just days in front of reporting disastrous fourth quarter 2015 financial results and updated 2016 guidance that led to the stock crashing 51 per cent around the TSX right away, costing Pershing itself US$1 billion in writing. 

As Valeant’s board are only able to have a maximum 14 directors, Katharine Stevenson voluntarily resigned to create a spot for Ackman, contributing to concerns of analysts who feel the board is too entwined with the company’s top management.

“Valeant’s board is way from independent and the changes allow it to be look even more entrenched,” Gimme Credit analyst Vicki Bryan said inside a note to investors. 

“The board’s decision how to add investor Bill Ackman as a director – another of its roster of insiders in our view – signifies that the board still thinks fixing the stock price is a cure, rather than a symptom of the company’s myriad problems.” 

This isn’t the first time Ackman has personally taken a seat around the board on the company with a troubled stock, demonstrating that he calls himself an activist for any reason. 

Ackman joined J.C. Penney’s board in February 2011 after Pershing Square amassed a stake in the department-store chain that made it among the company’s largest investors. Because the stock sunk further and additional he tight on changes in the company – including replacing the CEO – and finally ditched his entire stake in 2013 with a single sale that cost his firm about US$500 million.

Although he appears on much better terms with Valeant’s outgoing CEO, he will have a vote – alongside his colleague – on who’ll replace Pearson for that company’s top job.

“His formal involvement is restricted to one vote on that board,” said Tawil. “However, there’s no limit to how involved he can jump on an informal level, pursuant to the permission from the rest of the board and management.”

This can also be not the very first time Ackman has been involved with Valeant, as with an unsuccessful takeover bid for Botox-maker Allergan.

Tawil said Ackman’s appointment will, however, have its limits, with restrictions on trading Valeant’s stock in front of earnings reports, as he will have access to material, non-public information.  
dvanderlinde@nationalpost.com
Twitter.com/DamonVDL