Valeant Pharmaceuticals International Inc. is more than just a serial acquisition company that doesn’t care about organic growth, catalyst investor Bill Ackman says in defence of his support of Valeant’s fight for control of Allergan Inc.
In an appearance on CNBC’s Squawk Box Monday morning, Mr. Ackman also said that Allergan investors have told him they would support a transaction at $180 (U.S.) per share.
“Valeant is not just a roll-up,” Mr. Ackman said on the CNBC show Squawk Box on Monday, using the term to describe companies that rely almost exclusively on growth-by-acquisition.
Laval, Que.-based Valeant – whose products include consumer brand names in skin and hair care – is more like a Colgate or a Procter & Gamble than a typical pharmaceutical company, Mr. Ackman said.
“A bad roll-up is a company that uses an over-inflated stock price and a high multiple and non-cash GAAP earnings, heavily promoted by a CEO, to acquire companies at lower multiples,” he said.
Mr. Ackman’s hedge-fund firm Pershing Square Capital Management LP is Allergan’s largest shareholder with 9.7 per cent of the stock and Valeant’s partner in its takeover bid.
Valeant is preparing to put its unsolicited $54-billion offer directly to Allergan’s shareholders while Pershing Square seeks to turf out a majority of the target company’s board.
The cash-and-stock proposal works out to about $177 per Allergan share.
Mr. Ackman said on Monday he discussed Valeant’s bid with Allergan shareholders on May 29 and they indicated that a deal could be done at $180 per share.
Allergan spokeswoman Bonnie Jacobs said on Monday the company does not plan to respond to Mr. Ackman’s $180-per-share comment.
California-based Allergan has rejected Valeant’s offer and heavily criticized its business model while questioning the longer term value of its stock.
Mr. Ackman on Monday praised Valeant chief executive Michael Pearson’s growth strategy as being “very thoughtful,” with geographical and product diversification and little reliance on blockbuster products.
“His business looks a lot more like Colgate or Procter & Gamble,” he said.
Mr. Ackman also criticized short-seller Jim Chanos for questioning Valeant’s acquisition strategy and accounting methods.
“Unfortunately, Jim does not have Valeant right,” Mr. Ackman said.
“The accounting for companies that make a large number of acquisitions is very complicated. Complicated doesn’t mean wrong.”