So ends Bill Ackman’s valiant effort to prove that platform value is just like any other kind of value.

Pershing Square Capital Management’s three-year partnership with Valeant Pharmaceuticals International, which comprised a lucrative but legally controversial and ultimately unsuccessful takeover bid for botox-maker Allergan, a lengthy commendation of CEO Mike Pearson’s strategic genius at the Sohn Conference in 2015, and $4 billion in losses – roughly equivalent to gains on Canadian Pacific Railway and Allergan – ended Monday with confirmation the activist had sold its shares and would not stand its representatives for re-election at the 2017 annual meeting. Unfortunately, the investment community was more than available for comment.

valeant pharmaceuticals

Valeant

Valeant has become central to the story of activism in North America over the past three years. The pursuit of Allergan, with Pershing Square agreeing to drive the target company into the hands of the acquirer before investing, is still the subject of a class action lawsuit. It has been tried in slightly different forms by another activist, Lone Star Value Management, but bigger activists have held their breath.

Then there is the focus on shareholder primacy in the company’s strategy – Matt Levine this week called the company “a perfect masterpiece of hedge-fund activism,” with reference to criticism of ValueAct Capital Partners’ role in setting management incentives by Andrew Ross Sorkin. Given ValueAct talks a lot about perfecting compensation, this is a significant rejoinder to its otherwise mostly impressive record.

Nonetheless, the fallout for Pershing Square has been worse than for ValueAct. Pershing Square drew more attention to its role, and therefore opprobrium when things turned south. It defended management doggedly, suggesting the company’s problems were limited to its public relations, then intervened to replace Pearson with Joseph Papa, formerly of Perrigo, when it became clear that was not true. Although Pershing Square deserves some credit for helping steady the ship while Valeant secured refinancing for its extensive debt, there is no guarantee that the company will succeed. A sell-off following Ackman’s departure indicates that the market still looked to him for guidance, or at least an indication of what is going on inside the New Jersey headquarters. ValueAct, by contrast, bought three million shares on the dip, increasing its stake to over 5%.

Valeant has hit Pershing Square’s returns badly; the net asset value of its public fund was down 20.5% in 2015, 13.5% in 2016 and 2.1% in the two and a half months to Tuesday’s close. It is at least ten members of staff lighter than two years ago, with the investment team down by three. To charge performance fees – at least on its public fund – it needs to reach a net asset value of $26.37 per share, from $17.75. Under a litigation agreement signed with Valeant earlier this year, it could be on the hook for 40% of any damages and 50% of expenses from the Allergan class action. If that expires before a settlement is reached, as it will in November unless both sides agree to extend the agreement, the costs may be higher.

Pershing Square is not yet toast. It has made three new investments since the Valeant slide began, albeit only one publicly disclosed one – Chipotle Mexican Grill. Two new analysts are due to join later this year and a major office move is in the works. It still manages more than $11 billion, an amount most activists would envy.

That said, the fund’s reputation, which like Valeant’s had been based on rapid value creation, has been tarnished. Listing its reasons for investing in Chipotle, Pershing Square said the passage of time would help reputational issues, but the exact timing of a recovery would be difficult to predict. That may be Pershing Square’s fate too. So ends Bill Ackman’s valiant effort to prove that platform value is just like any other kind of value.

Pershing Square Capital Management’s three-year partnership with Valeant Pharmaceuticals International, which comprised a lucrative but legally controversial and ultimately unsuccessful takeover bid for botox-maker Allergan, a lengthy commendation of CEO Mike Pearson’s strategic genius at the Sohn Conference in 2015, and $4 billion in losses – roughly equivalent to gains on Canadian Pacific Railway and Allergan – ended Monday with confirmation the activist had sold its shares and would not stand its representatives for re-election at the 2017 annual meeting. Unfortunately, the investment community was more than available for comment.

Valeant has become central to the story of activism in North America over the past three years. The pursuit of Allergan, with Pershing Square agreeing to drive the target company into the hands of the acquirer before investing, is still the subject of a class action lawsuit. It has been tried in slightly different forms by another activist, Lone Star Value Management, but bigger activists have held their breath.

Then there is the focus on shareholder primacy in the company’s strategy – Matt Levine this week called the company “a perfect masterpiece of hedge-fund activism,” with reference to criticism of ValueAct Capital Partners’ role in setting management incentives by Andrew Ross Sorkin. Given ValueAct talks a lot about perfecting compensation, this is a significant rejoinder to its otherwise mostly impressive record.

Nonetheless, the fallout for Pershing Square has been worse than for ValueAct. Pershing Square drew more attention to its role, and therefore opprobrium when things turned south. It defended management doggedly, suggesting the company’s problems were limited to its public relations, then intervened to replace Pearson with Joseph Papa, formerly of Perrigo, when it became clear that was not true. Although Pershing Square deserves some credit for helping steady the ship while Valeant secured refinancing for its extensive debt, there is no guarantee that the company will succeed. A sell-off following Ackman’s departure indicates that the market still looked to him for guidance, or at least an indication of what is going on inside the New Jersey headquarters. ValueAct, by contrast, bought three million shares on the dip, increasing its stake to over 5%.

Valeant has hit Pershing Square’s returns badly; the net asset value of its public fund was down 20.5% in 2015, 13.5% in 2016 and 2.1% in the two and a half months to Tuesday’s close. It is at least ten members of staff lighter than two years ago, with the investment team down by three. To charge performance fees – at least on its public fund – it needs to reach a net asset value of $26.37 per share, from $17.75. Under a litigation agreement signed with Valeant earlier this year, it could be on the hook for 40% of any damages and 50% of expenses from the Allergan class action. If that expires before a settlement is reached, as it will in November unless both sides agree to extend the agreement, the costs may be higher.

Pershing Square is not yet toast. It has made three new investments since the Valeant slide began, albeit only one publicly disclosed one – Chipotle Mexican Grill. Two new analysts are due to join later this year and a major office move is in the works. It still manages more than $11 billion, an

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