November 19, 2014
By Riley McDermid, BioSpace.com Breaking News Sr. Editor
Legendary activist investor Bill Ackman had a lot to say about his biotech positions during an informal meeting hosted by ISI Group this week, including that his “biggest mistake” when pursuing Botox maker Allergan Inc. was launching a tender offer, sources told BioSpace Wednesday.
According to sources at the meeting, Ackman said the tender offer for Allergan was “purely optical” to get the company to yield to arbitration pressure and “did nothing really other than incur legal costs.” Ackman and Pershing ultimately lost that increasingly fractious hostile takeover bid to larger biotech Actavis , which will pay $66 million for Allergan in a cash and stock deal.
Ackman told traders at ISI that he will be meeting with Actavis CEO Brent Saunders this Friday “for the first time,” as his fund is “still in learning mode” to how the newly merged deal potentially fits into their 4 to 6 year “investment horizon criteria.”
Ackman did say that teaming up with Valeant Pharmaceuticals International on a bid for Allergan had taught him a few things as well, even if the partners didn’t wind up with Allergan in the end.
“On VRX, their stock had meaningful growth and just simply waited too long,” said a trader at ISI. “There is no bad blood or feelings. In the last 90 days, VRX business improved dramatically so they were reluctant to pull trigger.”
The partnership has since drawn the scrutiny of federal regulators at the U.S. Securities and Exchange commission, after Allergan complained that there was illegal coercion between Ackman and his hedge fund Pershing Square and Valeant Pharmaceuticals. The two helped push Allergan’s share price up 15 percent—a boon of around $1 billion to Ackman’s 9.7 percent stake.
The savvy hedger will pocket $2.7 billion from the $66 billion deal because Pershing has a 9.7 stake in Allergan and will make a killing on the the difference between its average $126-per-share cost and Actavis’ $219-a-share winning bid.
The money has apparently made Ackman magnanimous: He congratulated Actavis on its successful acquisition of Allergan earlier this week.
“We congratulate Actavis and Allergan on their announced transaction. As a result of the deal, we are withdrawing our special meeting request,” Ackman said in an e-mailed statement.
In the broader landscape, Ackman told traders that Allergan and Zoetis are his first healthcare positions in 11 years, but that he’s “open to more healthcare situations in the future.” Ackman said that Zoetis in particular had been educational, saying Pershing views ZTS as “strategically valuable, good durability of cash flow, able to work with management, and opportunities in cost cutting.”
Ackman said he was “concerned” Zoetis would be a distraction to the Allergan situation and “confusing to the market” but has apparently put those concerns to rest now that Allergan is safely married off.
