Bill Ackman, founder and CEO of Pershing Square Capital Management, addresses what a bad rollup looks like in business, and defends why Valeant Pharmaceuticals is “not just a rollup.”

Videos and excerpts below

Bill Ackman, founder and CEO of Pershing Square Capital Management, discusses James Chanos’ short thesis of Valeant Pharmaceuticals.

 

valeant is not just a roll up. let’s talk about what a good roll up is. berkshire hathaway. becky asked warren buffett what happens to the rollup when he is gone? it is a serial acquirer over the last 40 years. and it’s done a fabulous job. when buffett gave an answer to the question he talked about a roll up is a company, bad roll up uses an overinflated stock price at a high multiple. and noncash earnings, heavily promoted by ceo to acquire companies at lower multiples. that’s magicacretive. eventually it craters. all of a sudden the competitive advantage, which was simply a high stock price, goes away. tyco is an extreme example. they play accounting games. first of all, it is run by mike pierson. he has spent 20 plus years running the health care at mckenzie. he understood the payers, and sexuality industry. he came up with a strategy he implemented the last six years at valeant. it is very thoughtful. he has pursued particular markets, particular geographies and particular dermatologist, ophthalmology areas. where there is less risk of government payors are less of a risk. he’s in markets like eastern europe, which is less competitive. he focuses on durable products. the vast majority are companies with portfolios, patented products, so-called blockbusters. they spend a ton of money every year trying to come up with new blockbusters. he built a company that looks like colgate or procter & gamble than your typical pharmaceutical company. has he made a large number of acquisitions? yes. why has he made acquisitions that make sense. he runs a very low cost, zero based budgeting model. let me sort of make an analogy. burger king is controlled by the guys from 3g. they bought heinz. with buffett, 3g did a roll up which acquired anheuser-busch but started out as a small brazilian brewery 20 odd years ago. if you have a competitive advantage at operating at a low cost in an industry where everybody is operating at high costs, you can make a large number of acquisitions that are attractive. that’s what valeant has done. since pierce has been ceo, if you bought the stock and reinvested every dollar and dividend, you have made 26 times your money.

Discussing the evolution of big pharmaceutical companies, and Valeant’s old and new R&D model, with Michael Porter, Harvard Business School professor. Bill Ackman, founder and CEO of Pershing Square Capital Management, weighs in.

Bill Ackman, founder and CEO of Pershing Square Capital Management, answers why he thinks Valeant’s potential takeover of Allergan is beneficial, and the ‘unprecedented’ terms in the bid.

Discussing who is vulnerable amid multiple investigations into Herbalife, the company’s aggressive buyback, with Bill Ackman, founder and CEO of Pershing Square Capital Management.

Bill Ackman, founder and CEO of Pershing Square Capital Management, says he wants to help Carl Icahn “find a way out of Herbalife,” and why they are friendly again.

is there a chance you could ever team up together? he said he likes your strategy. i like carl. we could team up together. i would love to find him a way out of herbal life. if he could get out now he would have a very nice — does he agree with you? i can’t comment on carl and herbal life. i think it would be great for carl to sell. i think it would be fantastic. he said awful things about you. you’ve said awful things about him. it’s business. is it really just business? again, i think carl and i i’m very protective of my investors. we had a transaction. i believe he owed my investors money. he didn’t. court proved i was at least correct. but you know what, it’s time to move on. ultimately i decided — we had a year of sort of hating each other. he was very sweet to me on your very network. i called the guy up. we have a lot more in common in terms of — as he said, it is a common enemy. there is a movement to shut down shareholder activism. the king is marty lipton. shareholder active i. is not short-termism. 1980. founded 34 years ago. he died at the age of 4 in a four-day drinking binge in combination with painkillers. have you talked about any potential deals? no.

Bill ackman