Bill Ackman is leaving Valeant Pharmaceuticals.
The billionaire founder of hedge fund Pershing Square, who was once the company’s biggest cheerleader, has sold his investment and will step down from the Valeant’s board until its upcoming election.
The stock has fallen about 9% in after-hours trading on this news.
Jefferies will be handling the transaction for Ackman, selling 27.2 million shares valued at $US306,400,000 ($AU405 million), or $US11.10 to $US11.40 per share. Sources tell Business Insider that Jefferies is indicating interest on half the stock and is on the hook for the balance that doesn’t get paid.
The stock closed Monday at $US12.10. CNBC’s David Faber first reported the news, citing sources.
With the sale, Ackman is ending a yearslong and often controversial relationship with Valeant that began with a joint, hostile, bid for Allergan Pharmaceuticals in 2014. The deal didn’t pan out, but Ackman wound up acquiring a position in Valeant in 2015 — just before the company came under fire for its use of a shady mail-order pharmacy. It’s been downhill ever since, with the stock losing more than 90% of its value, shareholders suing Ackman and Valeant, and investigations into Valeant’s practices mounting.
“At its current market value, the Valeant position represented 1.5% to 3% of the various Pershing Square funds; however, the investment required a disproportionately large amount of time and resources,” Pershing Square said in a statement. “As a result, we elected to sell our investment and realise a large tax loss which will enable us to dedicate more time to our other portfolio companies and new investment opportunities.”
As he exits, Ackman leaves a company still burdened with over $US30 billion in debt and facing multiple federal investigations over its business practices. Though the market has been absolutely ripping since the start of the year, Valeant’s stock is down about 16%.
Most of that sliding occurred over the past two weeks, during which Valeant reported earnings. Guidance, according to Wall Street at least, was weak. And though the company said that it would be in compliance with all its debt covenants, a week later it announced that it was looking to refinance. None of this made investors happy.
Ackman likely isn’t happy, either. His fund took a bath in 2015, losing 20% the year that Valeant started crashing on accusations of accounting malfeasance and government scrutiny over its drug pricing.
“We continue to believe that the value of the underlying business franchises that comprise Valeant are worth multiples of the current market price,” he wrote in a letter to investors at this time last year.
There are also the Allergan investors who filed a lawsuit alleging that Ackman’s collaboration with Valeant in its failed bid for Allergan was illegal. Pershing made $US2.6 billion deal when a white knight bought Allergan out from under Valeant, and the firm stands to lose all of that in the event Valeant and Pershing are found guilty.
Ackman told CNBC’s Scott Wapner that his “only mistake with Valeant [sic] is that ‘I should have sold’. Says he underestimated damage media coverage and falling stock price would have.”
Pershing’s full statement below:
Pershing Square Capital Management, L.P. Announces Sale of Its Investment In Valeant
Pharmaceuticals International, Inc.
New York, 13 March 2017 //‐ Pershing Square Capital Management, L.P. (“Pershing Square”) announced today that it has sold its investment in Valeant Pharmaceuticals International, Inc. (“Valeant”) (ticker: NYSE: VRX). Pershing Square CEO Bill Ackman and Vice Chairman Steve Fraidin will remain on the Valeant board until the upcoming annual meeting but will not stand for re‐election.
At its current market value, the Valeant position represented 1.5% to 3% of the various Pershing Square funds; however, the investment required a disproportionately large amount of time and resources. As a result, we elected to sell our investment and realise a large tax loss which will enable us to dedicate more time to our other portfolio companies and new investment opportunities.
After Bill Ackman and Steve Fraidin joined the Valeant board in March 2016, they worked with their fellow directors to take important steps to stabilise Valeant and position it for the future. Those steps included:
- Replacing senior management with talented executives, including CEO Joe Papa, CFO Paul
- Refreshing the board of directors with 10 new members;
- Returning the company to a current and timely filing schedule with the SEC;
- Receiving appropriate amendments and waivers under applicable credit agreements;
- Announcing a strategy to sell non‐core assets to improve the company’s balance sheet;
- Paying down ~$US2.7 billion of net debt with the sale of non‐core assets and free cash flow generation; and last week, priced a $US3.25 billion bond refinancing and covenant waiver package which extends maturities and reduces the company’s exposure to floating interest rates.
CEO Joe Papa and his team have done an excellent job refocusing and setting a new course for the company. We wish the company and its extremely hard working, dedicated and loyal employees great success in the future.
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