Bill Ackman, CEO at Pershing Square Capital, and Michael Pearson, Chairman/CEO at Valeant Pharmaceuticals Intl Inc (NYSE:VRX) (TSE:VRX), spoke with Bloomberg Television’s Stephanie Ruhle and Erik Schatzker today about their joint bid for Allergan, Inc. (NYSE:AGN) and explain how and why they partnered for the deal.

Bill Ackman On Allergan, Valeant, Herbalife [FULL TRANSCRIPT]

When asked if he is a corporate raider, Ackman said “No, no one is being raided.  Actually what we’re doing is we’re helping facilitate a transaction between two companies for the benefit of the shareholders.” On whether Allergan, Inc. (NYSE:AGN) would feel the same way, he said “I don’t know, you have to ask them.”

Bill Ackman said “The entire pharmaceutical industry is changing.  There is a dynamic happening.  Why is there so much opportunity for synergies?  And the answer is there is a lot of costs in this industry.  It’s one of the few industries which has not been forced to operate with the same kind of economic discipline as other industries.  And I think that Mike [Pearson] and his team had been a driving force in leading the charge and making this a much more shareholder-oriented industry and making this a much more profitable industry.”

On Herbalife Ltd. (NYSE:HLF), Ackman said: “I don’t think this stock gradually goes to zero. I think it’s more of an overnight phenomenon. You have a criminal investigation in the Department of Justice. The FBI have launched a criminal investigation….For the FDC to go to a formal investigation here with the vote of the commissioners – what they’re telling the market is, they certainly see some evidence of serious problems at the company. And the FDC’s track record of going after pyramid schemes is pretty much, they’ve got about 100% batting average.”

Highlights from Bill Ackman include:

  • Short termism in investing is bad
  • Entire pharma industry is changing
  • He’s never before invested in pharma
  • Valeant more like procter & gamble than biotech
  • Valeant business model more efficient than rivals
  • “No-one’s being raided’ at Allergan
  • Stock & cash offer is win-win for shareholders
  • Pearson makes full & fair offers, not overpaying
  • Valeant-allergan easily $200 stock when deal closes
  • Simplest trade is to `buy Valeant stock’
  • Doesn’t think Herbalife stock gradually goes to zero
  • Herbalife demise `more an overnight phenomenon’; investigations serious

Bill Ackman’s Full 30-minute interview

Bill Ackman: Herbalife at Zero an Overnight Phenomenon

ERIK SCHATZKER:  Michael, why don’t we begin with you?  You run Valeant.  Ultimately Valeant’s going to be acquired here, take on Allergan’s assets and employ the synergies that you believe that you can gain.

There is a good reason why everyone is so fascinated by this partnership that you’ve formed with Bill Ackman, innovative, unprecedented, et cetera, et cetera.  But I think what the market is still struggling to understand is why you could not do this on your own.

Why couldn’t Valeant have gone out and bought a bunch of OTC call options and forward contracts and taken a 10 percent position in Allergan by itself?

J. MICHAEL PEARSON:  I think a number of reasons.  One is Bill and Pershing Square is much better at trading and doing that type of thing than we would ever be able to do.  We don’t have people with those capabilities.

Second is we did not have $4 billion to put at risk.  Mr. Ackman and his team have contributed $4 billion towards our cause.  They now own 10 percent and they could be an independent voice to Allergan’s.  They’re the largest shareholder Allergan has.

Finally, in terms of the probability of this deal being done, having a third party that is validated our model, fit our business  and truly believes the combination is terrific for shareholders in the short and long term is a huge asset.

SCHATZKER:  Can I just follow up on each of those points very quickly?

First is you are absolutely right, Valeant does not have the share purchasing expertise that Bill does, but Goldman Sachs does, Morgan Stanley does, JPMorgan does.

PEARSON:  We would have to pay for it.

SCHATZKER:  OK, we’ll get to that in one second.

The second point that you made, which is about remind me, the third point was the fact that you would have Bill helping to force through an acquisition.  Let’s get to that then.

I have met and know a number of arbitragers.  If you put a deal on the table for Allergan, the arbs would help to drive that forward wouldn’t they?

PEARSON:  And we hope they will.

SCHATZKER:  They are right now I’m sure.  They’re in the stock.


SCHATZKER:  And remind me what the second point was.

PEARSON:  I think the second point was we had someone independent coming in and validate our operating model and that Bill is not just buying, hoping this transaction goes through but he is committed to being a long-term investor.  So he sees the short-term opportunities as well as the long-term opportunity for Valeant.

BILL ACKMAN:  All right.  If this were an all-cash deal, I think we would add in some ways less value.  But because part of the — a meaningful part of the consideration is what you’re — really  what you’re doing, if you’re an Allergan shareholder, is you’re becoming a shareholder in the combined enterprise.

And your ultimate outcome depends on how this business does over the next several years, five years, 10 years, if you’re a long-term investor.

And before we were ready to participate, we had to be comfortable with Valeant’s business.  And they have got an incredible track record.  Stock’s done extremely well.  But it is still, I think, a very much misunderstood company.  One of the things we thought we could do is help — once we understood the story and validated the business model, we could help the market understand why this is — it’s more — I would much rather sell for stock in Valeant than sell for cash, which is why I’m electing stock in the transaction.


RUHLE:  How many acquisitions have you made?

PEARSON:  It’s well over 100 acquisitions.

RUHLE:  And how big is your integration team at Valeant?  One would think that would just take a huge amount of manpower to get through all that.

PEARSON:  Actually we do not have a specific integration team.  Our managers know how to integrate.  So the line people are involved in the integration.  The fact we are decentralized makes it a lot easier.

So if we buy assets like Allergan’s we have a whole Polish team — Bill was over there and met them — so we have a Polish team that will take those assets and build — and put them into their decentralized operation and we can do that very, very quickly.

And our people are very experienced both at running companies but also integrating.  It’s is core competency.

RUHLE:  Is there a model we could look to, an acquisition that you have made that you have said, here’s what it looks like; we bought it and now here is the success story?   Just to give us a better understanding.

PEARSON:  I think our most recent acquisition, Bausch & Lomb, is a terrific company, everyone has heard of it.  We closed and five months later, it is completely integrated.  The organic growth in the company has accelerated since we

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