| BOSTON, March 14
BOSTON, March 14 Valeant Pharmaceuticals Inc's
stock price fell to its lowest level in eight years on
Tuesday after the abrupt exit of its biggest supporter put
renewed focus on the Canadian company's most pressing problem:
raising capital to cut its roughly $30 billion debt pile.
Billionaire investor William Ackman spent more than a year
trying to revive Valeant's stock price by helping to overhaul
management, refresh the company's board, and push for asset
sales. But in a surprise move announced on Monday he said he had
sold his entire stake, some 27 million shares, and would be
leaving the company's board.
He explained the investment was requiring a
"disproportionately" large amount of time and resources.
This has been his biggest loser since launching his fund in
On Tuesday, the Canadian company's U.S. listed shares
dropped 10 percent to $10.50, their lowest since May 2009, and a
fraction of the near $190 a share Ackman's Pershing Square
Capital Management paid for them in early 2015. He announced his
stake in March 2015 and shares surged to $260 a share a few
Probes into its business practices, accounting and drug
pricing caused a collapse in Valeant's shares and the company is
now offloading assets to try and pay down debt, amassed during a
years-long acquisition spree.
Its new management team refinanced the company’s debt burden
last week, giving it more breathing room to repay creditors. Its
newly issued notes traded down about 0.8 percentage points on
Last week, Valeant told investors that revenue could fall as
much as 8 percent this year but that it had paid down about $1
billion in debt and would put proceeds from the sale of its
Dendreon cancer treatment business and three skincare brands for
$2.12 billion, announced earlier, to that purpose.
"At Valeant right now, it is all about divestitures," said
Umer Raffat, an analyst at Evercore ISI. The company committed
itself to raise some $5 billion in assets from asset sales by
the middle of next year.
The company has also mulled selling the surgical tools unit
of its Bausch & Lomb eye care division and letting go of some
additional dermatology brands plus several international
Ackman played a critical role in trying to push management
to sell assets, according to an analyst and three people
familiar with his actions.
However, his biggest goal of selling the company's
gastrointestinal unit Salix to Japan's Takeda was not reached
after a disagreement over price, one person said on Tuesday.
There were mixed reactions to Ackman's exit.
"With ... one of its most vocal supporters selling its stake
near the low for the past 10 years, we see this as a vote of no
confidence for the stock and that things are continuing to go
from bad to worse for Valeant," said Wells Fargo analyst David
Maris, who rates the stock an underperform.
But one investor in Ackman's fund, Pershing Square Capital
Management, said his departure could give management more room
to act and eventually pave the way for other investors to step
Ackman's concentrated bets and brash declarations - he once
said Valeant would hit $448 a share by 2019 - have made him a
polarizing figure on Wall Street with some investors keen to
take the opposing view from him.
Hedge funds, which can flip stocks quickly, owned 28 percent
of Valeant's shares at the end of last year, according to data
from Goldman Sachs. Valeant has long been one of the hedge fund
industry's favorite bets. But some 9 percent of Valeant's shares
were lent out to short sellers betting that the stock would go
down, according to the bank.
Ackman first bought Valeant as a passive investment, saying
he was happy with management. He shifted gears a year ago when
the company faced several probes.
Ackman secured board seats for himself and a colleague,
fired then chief executive Michael Pearson, and helped persuade
Joseph Papa to join Valeant as CEO.
He played a significantly more hands-on role than other
investors, including activist fund ValueAct, which had helped
build the company by recruiting Pearson to the top job years
John Paulson's Paulson & Co, which tends to keep a low
profile and serve on few boards, is now Valeant's biggest
investor with ValueAct, which has one board seat, its second
ValueAct did not respond to requests for comment and Paulson
could not be reached.
With Ackman and his firm's vice chairman, Steve Fraidin,
stepping off the board at the next annual meeting, there is a
question of who might take their seats. It is unclear whether
Paulson might put forth a representative or ValueAct, which once
had two seats but has been trimming its exposure, might add
(Reporting by Svea Herbst-Bayliss Additional reporting by
Caroline Humer and Carl O'Donnell; Editing by Toni Reinhold)