MONTREAL – Hedge fund billionaire Bill Ackman has committed to Valeant, publicly defended Valeant and, quickly after joining the company’s board, it appears 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 at the drugmaker’s New Jersey offices, Bloomberg News reported.
“I’m getting excited about working 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 locate a alternative to Pearson.
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David Tawil, president of the Maglan Capital hedge fund, asserted even though it is quite normal for any firm with simply several big investments such as Pershing Square to put an employee on the company board, it takes extraordinary circumstances for the CEO himself by sitting.
“It truly needs to be a very sensitive, very heightened, very important situation for the head of the firm to go ahead and speculate on the board of a company,” Tawil said within an interview.
Pershing Square’s sunk cost in Valeant is really deep as the biggest hedge fund shareholder of the Laval, Que.-based company with more than 21.5 million shares – nine per cent of the total.
Since taking a position in the first quarter of 2015, the fund is wearing paper lost more than US$2 billion on its position which has progressively brought Ackman deeper and deeper in to the embattled company.
What began by having an investment, moved to him holding a four-hour-long conference call defending the organization when dealing with short-seller attacks and has progressed to him now taking an active role in Valeant’s direction.
“The company’s large scale and dominant franchises in eye care, dermatology, GI, and other therapeutic areas coupled with its extraordinarily low valuation present a spectacular chance of a world-class healthcare executive,” Ackman said in the news release.
Ackman is located 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 resulted in 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 possess a maximum 14 directors, Katharine Stevenson voluntarily resigned to create a spot for Ackman, adding to concerns of analysts who have the board is too entwined using the company’s top management.
“Valeant’s board is way from independent and the changes allow it to be look much 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 – yet another of their roster of insiders in our opinion – implies that the board still thinks fixing the stock prices are a remedy, as opposed to a characteristic of the company’s myriad problems.”
This is not the first time Ackman has personally taken a seat on the board on the company having a troubled stock, demonstrating he calls himself an activist for a reason.
Ackman joined J.C. Penney’s board in February 2011 after Pershing Square amassed a stake within the department-store chain that managed to get among the company’s largest investors. As the stock sunk further and further he pressed for 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’ll possess a vote – alongside his colleague – on who’ll replace Pearson for the 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 is able to get on an informal level, pursuant towards the permission from the remaining board and management.”
This is also not the first time Ackman has been involved with Valeant, as on an unsuccessful takeover bid for Botox-maker Allergan.
Tawil said Ackman’s appointment will, however, have its boundaries, with restrictions on trading Valeant’s stock in front of earnings reports, because he is going to have use of material, non-public information.
dvanderlinde@nationalpost.com
Twitter.com/DamonVDL
