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UPDATE 2-ValueAct boosts Valeant stake after Pershing exits
March 16, 2017 / 9:42 PM / 8 months ago

UPDATE 2-ValueAct boosts Valeant stake after Pershing exits

(Adds details on stake, background, analyst quote)

By Michael Flaherty

March 16 (Reuters) - ValueAct Capital raised its stake in Valeant Pharmaceuticals International Inc, in a move that could provide a confidence boost to the drug company three days after its largest shareholder sold out of the stock.

The show of faith came in contrast to Pershing Square Capital Management, which exited its stake on Monday, suffering a more than $3 billion loss after spending 18 months trying to repair the company.

ValueAct’s disclosure on Thursday is another plot twist in a saga that began in the middle of 2015, when questions about Valeant’s business practices sparked a series of news events and lawsuits that sent the stock into free-fall. The stock is down 95 percent since its July 2015 peak.

ValueAct’s purchase of around $30 million worth of shares this week is a tiny fraction of the billions of dollars it once held in the company. Still, the move carried symbolic significance from a shareholder that has owned Valeant shares since 2006.

“ValueAct is signaling to the market that they think it is a positive factor that Pershing Square is no longer a shareholder,” said activist hedge fund research and data provider, 13DMonitor in a note on Thursday. “There is no change in intent or purpose.”

In its filing on Thursday, ValueAct said the purchase this week boosts its holdings to 5.2 percent from 4.4 percent last quarter. The Canadian drugmaker’s shares rose about 5 percent to $11.73 in extended trading on the news.

Pershing became one of Valeant’s biggest investors in 2015 when it sunk some $3.2 billion into the company. Pershing founder William Ackman played a major role in convincing Valeant’s former CEO Mike Pearson to pursue a bid to buy botox maker Allergan Inc in 2014, a deal that ultimately failed.

With crisis seizing the company late in 2015, Pershing purchased more shares of Valeant, seized two board seats and became the company’s most out-spoken proponent.

At the time, ValueAct, which had been selling down its once massive stake, pared its board presence to one seat. Ackman embarked on an effort to sell assets and regain investor confidence in the stock. Pearson was replaced last year with former Perrigo CEO Joseph Papa.

But on Monday, Ackman called it quits on the effort, saying it was time to focus on other portfolio companies. The announcement sent the stock down more than 10 percent, and put the focus back on two of Valeant’s largest hedge fund holders: ValueAct, and Paulson & Co.

ValueAct helped install Pearson as CEO in 2008 and had at least one of its employees on the board since 2007.

Pearson led the company on an acquisition spree that sent shares from the $20 range to $257 in 2015, before the stock went into a tailspin.

ValueAct, which currently has partner Robert Hale on the company’s board, said on Thursday that it will continue to have discussions with officers of the company and directors to increase the company’s value. (Reporting by Gayathree Ganesan in Bengaluru; Editing by Shounak Dasgupta, Bernard Orr)

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