(Reuters) – Hedge fund mogul William Ackman has purchased a US$3.3 billion stake in Valeant Pharmaceuticals International (VRX.TO), making his firm the drug company’s fifth-largest stakeholder, a source familiar with the matter said on Monday.
Ackman’s US$20 billion Pershing Square Capital Management began building up the 5 percent stake in the Canadian drug maker this year, only months after his vocal effort to help Valeant buy Botox-maker Allergan (AGN.N) failed.
The source, who asked not to be named, said the fund would take a passive approach to Valeant, instead of pressuring it to change management or pursue strategic options, as it does with most of its investments.
Known as one of corporate America’s noisiest agitators, Ackman was the top performer in the realm of large hedge fund managers last year with a 40 percent return. His Pershing Square has notched big wins at railway Canadian Pacific (CP.TO) and shopping mall operator General Growth Properties (GGP.N), and also made money with its Allergan stake.
Valeant sought Ackman’s help in early 2014 to buy Allergan, leaving the hedge fund to spend roughly US$4 billion to build its 9.7 percent stake in the Botox-maker. But Allergan rejected Valeant’s overtures, sued the hedge fund and instead sold itself to rival Actavis in November.
While working with Valeant on the takeover bid, Ackman could not buy Valeant shares. All restrictions fell away when the deal fell through, leaving him able to buy in, paying just under US$200 per share initially, the source said.
Last month, Valeant bought Salix Pharmaceuticals for US$14.5 billion, pushing its share price up further. Valeant shares were trading at US$256.94 on Monday afternoon, up more than 2.5 percent.
Some investment industry sources had speculated that Ackman would press for a deal between Valeant and animal health company Zoetis (ZTS.N), in which Ackman has a US$2 billion stake and a Pershing Square partner on the board.
But the source said Pershing Square would take a passive approach because Ackman had faith in Valeant’s management, including in Chief Executive Officer Michael Pearson, who has slashed costs, cut the company’s tax rate by moving it to Canada and turned it into a serial acquirer during his seven years as CEO.
By Svea Herbst-Bayliss
(Editing by Richard Valdmanis, Chizu Nomiyama and Paul Simao)
Photo courtesy of Reuters/Brian Snyder