If you were watching the wires Monday, you may noticed that Allergan, the pharmaceutical company targeted by Valeant and Bill Ackman for a hostile takeover, issued a release about Valeant’s latest (rebuffed) offer to buy the company for $US53 million.
And within that release were some emails from Valeant’s banker, Morgan Stanley.
These were not flattering emails, especially given the fact that Morgan Stanley is Valeant’s banker.
Here’s a sample:
Robert Kindler, Vice Chairman and Global Head of M&A, Morgan Stanley
Email to Allergan’s CEO, David Pyott, and CFO, Jeff Edwards, May 13, 2014
“My takeaway is that AGN is not being nearly aggressive enough in going after the VRX business model and currency.”*
David Horn, Managing Director, Investment Banking Division (Healthcare), Morgan Stanley
Email to Jeff Edwards, May 18, 2014
“Part of what Rob [Kindler] is suggesting [to Allergan] is to allow him to use his significant relationships with media and analysts to provide a clear and detailed articulation of why Valeant is a house of cards and your investors should not want to take their stock.”
“*Permission to use quotations was neither sought nor obtained,” said the release at the end — go figure (the WSJ noticed that one). So in other words, it appears the emails were leaked from Morgan Stanley to Allergan.
To review: Two Morgan Stanley Mergers & Acquisitions bankers — the bank Valeant is using to secure its purchase of Allergan — emails Allergan about the most damning criticism of the deal (which is that Valeant’s business model is crap). BI’s Myles Udland has argued that it could destroy the pharmaceutical industry as we know it because of its propensity to slash R&D.
And he’s not the only one. Hedge fund managers like Jim Chanos and John Hempton have argued that Valeant needs acquisitions (like this one) to sustain his business, which only looks healthy on paper because of its use of aggressive acquisition accounting.
Now you may be saying to yourself, ‘that’s just two Wall Street bankers doing their jobs as consultants,’ nothing to see here. Move along. Valeant, for its part, is standing by its bankers.
And if Valeant thinks this is fine then who cares, right?