The Morning Brief: ValueAct Buys More Valeant Stock

March 17, 2017   Stephen Taub


The hedge fund firm is raising its stake as Pershing Square bails out.

San Francisco hedge fund firm ValueAct Capital has strengthened its commitment to Valeant Pharmaceuticals International. On Tuesday ValueAct bought an additional 3 million shares of the embattled drug maker, most of them for $10.81 per share, according to a regulatory filing made public late Thursday. It now owns just shy of 18 million shares, or 5.2 percent of the total shares outstanding.

In a regulatory filing, ValueAct said the stock was undervalued and "represented an attractive investment opportunity." The purchases came the same day Pershing Square Capital Management dumped its entire stake of more than 18 million shares. Valeant’s stock rose 1.73 percent on Thursday, to close at $11.20. It was up another 4 percent in after-hours trading after ValueAct disclosed its filing.

ValueAct took its initial stake in Valeant in 2006. It helped Valeant identify major cost savings and sell its pharmaceuticals pipeline so it could focus on its branded generics business, which was deemed less volatile at the time. This enabled the company to slash its research and development budget by more than half. In 2008, ValueAct also recruited J. Michael Pearson from consulting firm McKinsey & Co., where he had spent 23 years, to serve as chairman and chief executive officer of Valeant. In 2010, Biovail Corp. acquired Valeant for $3.2 billion and then retained the name Valeant.

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Starboard Value cut its stake in Tribune Media to 4.4 percent. As a result, the activist hedge fund firm headed by Jeffrey Smith is no longer required to make timely disclosures when it sells additional shares. On February 21 — or less than a month ago — Starboard disclosed it owned 6.6 percent of the media company. At the time, it did not offer a specific plan for boosting its value. Since then the stock has gained about 14 percent.

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Partners and other key people continue to flow out of Pine River Capital Management. Reuters reports that Franklin Parlamis, deemed the firm’s most senior executive on the West Coast, left the firm a few weeks ago and launched his own firm, Aequim Alternative Investments. In addition, Annette Krassner, the firm’s long-time chief administrative officer, is leaving at the end of the month. She heads up human resources, facilities, events, administrative staff and internal communications, according to the report.

Pine River's firmwide assets have fallen to $9.8 billion from $15 billion in 2015. Back in October, Michael O’Connell, who ran Pine River’s capital structure arbitrage strategy, took his team to Paloma Partners. Earlier two other key people left: Gaurav Tejwani, formerly co-head of structured credit, and Brian Zied, formerly co-head of equities, according to reports. The firm, which fashions itself as a specialist in relative value trading, was founded in 2002 by Brian Taylor.


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