The shares Valeant Pharmaceuticals are trading higher after Bill Ackman of Pershing Square Capital Management disclosed his stake in the company on Monday. Pershing had a new big long position as first reported by ValueWalk.
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The activist investor said his firm purchased 16,473,933 shares or 4.9% of Valeant Pharmaceuticals. The stake represents 16.9% of Pershing Square Holdings’ portfolio.
The stock price of Valeant Pharmaceuticals was up almost 3% to $204.30 per share at the time of this writing around 1:15 in the afternoon in New York on Monday.
Pershing becomes the fifth largest shareholder of Valeant
As first reported by Reuters, Ackman’s firm started building its stake in Valeant Pharmaceuticals this year, months after his failed effort in helping the company to acquire Allergan.
Pershing’s stake in Valeant Pharmaceuticals is worth around $3.3 billion. The hedge fund is now the fifth largest shareholder of the Canadian pharmaceuticals company, according to the report.
The sources who requested anonymity said Ackman’s investment in Valeant Pharmaceuticals is passive, which means the activist investor will not pressure the drug maker to pursue management changes or strategic options.
According to the people, Ackman has faith in the management of Valeant Pharmaceuticals including its CEP Michael Pearson. He reduced the company’s costs and tax rate by moving its global headquarters to Canada.
Pearson also led the company in making strategic acquisitions. Valeant Pharmaceuticals recently acquired Salix Pharmaceuticals for $158 per share or $14.5 billion in total enterprise value.
Valeant sought Ackman’s help to acquire Allergan
Last year, Valeant Pharmaceutical asked the help of Ackman to pursue its intention to acquire Allergan. Pershing Square Capital Management invested $4 billion to acquire 9.7% stake in the Botox maker.
Allergan rejected the proposal of the Canadian Pharmaceuticals company and sold itself to Actavis last November. The Botox maker also filed a lawsuit against the activist hedge fund.
According to the sources, Ackman was restricted to purchase shares of Valeant Pharmaceuticals while he was working with the company on its bid to takeover Allergan. The restriction was lifted after Valeant failed to strike a deal with Botox maker.
The sources said Ackman initially acquired its stake in Valeant Pharmaceuticals for less than $200 a share. Some market observers are speculating that the activist investor would push a merger between the Valeant Pharmaceuticals and Zoetis, an animal health company.
Last November, ValueWalk reported that Ackman sold a portion of his stake in Allergan, and would reinvest 15% of the profits ($344 million) to Valeant Pharmaceuticals.
Ackman has $2 billion stake in Zoetis, and a partner of Pershing Square Capital Management is a member of the board of the animal health company.