dont be so sure. Allergan shareholders have a vote as well and Pfizer is an anchor on growth
Glossary of Hostile Takeover Terms with Discussion
- Thread starter Shoham
- Start date
IMO this deal hinges on the movement in price. Clearly when the Teva announcement was announced and we saw $340 for AGN, this shows the potential that AGN has independently. Unless PFE deal moves that needle closer to $400, not sure that is going to cut it. As a shareholder myself, I vote no unless this deal is closer to $400.
As will Wall Street; they are the ones who really control this vote.
Another strong earnings call from AGN. The results should bring some additional confidence to the shareholder base of PFE that there is little to question in terms of deal risk as far as AGN performance is concerned. Saunders did a reasonable job explaining the status to date on both Teva and PFE transactions. As we have discussed the next key milestone is the Teva closure, which now looks like early April. This is a big contingent risk that once removed will move the confidence needle for the PFE deal considerably. I still remain puzzled by the share premium that exists, but I remain confident that the premium will decline over the next few months. The inversion "risk" - i.e. the deal being broken by the Treasury - is virtually non existent. PFE and AGN have paid the best minds in the industry to advise them and I'm confident that they have all their ducks in a row. The remaining risks are regulatory in nature. I'm by no means any expert here, but nobody has articulated any specific regulatory risk - just general risk. The last risk is simply the time risk. A stated closing of 2H 2016 is vague and carries with it time risk. The same message from me as in the past...as time goes on the deal premium will settle out and the deal will look increasingly more attractive to the market. Got my eye on the Teva closing details over the next few weeks.
P 551
P 551
- Shoham Mar 02, 2016 at 05:08: PM
Shoham
Member
Hi everyone:
I know that PFE is on everyone's mind; but there is depressingly little new on that front: Management is still working the details to close the deal, and the shareholders remain unconvinced (as evident by the insanely high deal premium). At some point, management will need to convince a super-majority of shareholders; and if they have a winning argument, they haven't let it out. If they can't win the vote then all the other risk factors are irrelevant, there would be no deal.
With regard to the Barron's story. They quote Canaccord’s Corey Davis and Lidia Lu who opines that the closing likelihood is high, and rationalize the high premium.
We continue to think that the probability of the Pfizer (PFE)-Allergan deal closing is high, but the spread remains wide because:
1) there isn’t enough capital in the arbitrage community to close the gap;
2) Zoetis (ZTS) is a gating factor on timing — a merger can’t happen until July ;
3) the FTC needs to approve Actavis’ generic divestiture to Teva (TEVA) first;
4) there is no obvious hedging strategy available; and
5) some are forgetting that this is technically a merger of equals, not an “inversion.”
I have to respectfully disagree with every one of those points.1) there isn’t enough capital in the arbitrage community to close the gap;
2) Zoetis (ZTS) is a gating factor on timing — a merger can’t happen until July ;
3) the FTC needs to approve Actavis’ generic divestiture to Teva (TEVA) first;
4) there is no obvious hedging strategy available; and
5) some are forgetting that this is technically a merger of equals, not an “inversion.”
1: What do you mean there isn't enough capital? There is a (supposedly) surefire opportunity to make a 20% return in a few months and no one in Wall Street has any money to take it? Is all the Wall Street money busy being deployed in even more profitable opportunities? I'd like to know what those are!
2: What does ZTS have to do with anything?
3: This is a transaction risk factor. Personally, I don't think it's a big risk factor, but if the authors think it is large enough to explain (at least in part) the huge premium; then they can't say, in the same breath, that closing likelihood is high.
4: What do you mean no obvious hedging strategy available? This is one of the easiest hedges ever. You long one AGN share and short 11.3 PFE shares. When the deal closes, you will get 11.3 PFE shares for your AGN share; you use those to cover your short, your position is closed out, and you keep the deal premium cash. As long as the deal closes, it doesn't matter when or what are the prices of the two shares between now and then, your profits are locked in. Hedging strategies don't get more obvious than this. (Real Hedge funds use more complicated strategies, using options, but the classic long-short hedge is about as obvious as it ever gets)
5: How this alleged forgetfulness, in any way, relevant to the deal premium? The premium is real, regardless of how one labels the deal. The only way to lose money on a hedge is if the deal doesn't close.
The bottom line is that a high premium means the closing probability, as evaluated by the collective wisdom of investors who buy and sell these stocks, is not very high.
----
But, enough about rehashing non-news; let's talk about something more fun -- even if not really relevant to us anymore. Yes, you guessed it, let's talk about Valeant
.Original readers of this thread know that I've long pointed that Valeant's valuation and business model are unsustainable. I used that argument to (correctly) surmise that they will fail to acquire Allergan. I also predicted that once they fail to acquire Allergan, the "House of Cards" will collapse and their share will crater, maybe even go to insolvency. That prediction, at least temporarily, was way off, as their share price more than doubled in the months following the failed take over (but seriously cratered thereafter, hitting multi-years lows).
More recent comers to this thread know that once the Philidor debacle exploded, I did a bit of open sources research and discovered what looked like multiple frauds on a massive scale -- much of it subsequently came to the mainstream media. Michael Pearson, CEO, checked himself into a hospital with pneumonia a few days after the scandal broke (back from the hospital last Sunday). Valeant shareprice, after taking a significant hit when the scandals kept rolling, appeared to have stabilized once they got their investor communications machine back into play. However, on these pages, I still kept asking what will happen when they need to put out audited financial statements. Their auditors, E&Y, is a very respected CPA firm and everyone remembers what happened to the CPA who signed Enron's financial statement (it was Arthur Andersen, a ~100 year old firm with offices in ~100 countries and ~100K employees; they collapsed immediately afterward). Valeant may have fast talked investors into giving them more time to line up their story, but how are they going to get E&Y to sign off on their annual report?
Well, the deadline for releasing financial statements for large publicly traded companies is 60 days after the end of the year (which, by my calendar, that would be 2/29/2016 -- this past Monday). You can get a short grace period afterward if you file a statement with the SEC giving a reason (it doesn't have to be a good reason, the grace period is automatic, it's just to get the company on record as to what's up). If you miss the grace period, things start getting calamitous fairly quickly: Corporate bonds may go into technical default -- which makes them immediately due and payable, stock exchanges' rule require delisting -- which then require many conservative funds (like pension plans) to divest, and so on.
So what happened Monday?: There was no audited financial statement released (oh! oh!). Also, no date when they will release it (double oh! oh!). But it will be after the grace period expired (triple oh! oh!). Also, cancel the investor call (ok, that one is obvious). Also, withdraw 2016 guidance (Wham! Guidance is not even part of the audit process, so even if the financial statement release is being held up by some squabbling with E&Y over accounting fine points; guidance wouldn't be at issue -- UNLESS, the issues are so huge as to broadly impact the next year as well). Also, they disclosed that they are under SEC investigation (in addition to the investigation they inherited when they bought Salix) (Wham! Wham! Wham!). This investigation is particularly ironic: When Citron Capital (the short seller who brought the Philidor and R&O matters to the forefront) accused Valeant of accounting irregularities, Valeant tried to present a clean image by publicly asking the SEC to investigate Citron "untruthfulness." Seems the SEC concluded Citron was entirely within their rights to opine that Valeant is fraudulent, and that it is Valeant that is now being investigated with connection to Philidor and "other" matters.
So what was the reason given for missing the deadline? How about:
Given the timing of Mr. Pearson’s return, the Company is rescheduling its previously announced call to discuss preliminary fourth quarter 2015 results, deliver a business review, and provide updated 2016 guidance. In the interim, the Company is withdrawing its prior financial guidance.
http://hsprod.investis.com/shared/v...SEQ=1&SEQ=&SQDESC=SECTION_BODY&exp=&subsid=41and also:
The filing of Valeant’s Annual Report on Form 10-K for the year ended December 31, 2015 will be delayed pending completion of the review of related accounting matters by the Ad Hoc Committee, with the assistance of its independent advisors, and the Company’s ongoing assessment of the impact on financial reporting and internal controls. To date, the Company has not determined whether any restatements will be required or whether any control deficiencies constitute material weaknesses. As a result, Valeant does not expect that it will be in a position to file its Annual Report on Form 10-K within the 15-day extension period provided in Rule 12b-25(b).
http://hsprod.investis.com/shared/v...maceuticals&ipage=10783660&DSEQ=&SEQ=&SQDESC=I can see a CEO being hospitalized as a reason for missing a key deadline, but returning from the hospital? How's that? If returning from the hospital is so disruptive as to miss a crucial filing deadline and grace period, perhaps he should have been asked to just stay home? Likewise with the ad hoc committee. If a committee looking into accounting governance has found issues, then it would explain missing a deadline. But if they haven't found anything (yet, or else they have to disclose it), then just saying they haven't finished their review is hardly a lateness excuse. Lame!
The investors didn't take kindly to all this news. Share price went from around $85 (Thursday closing, just before the latest collapse begun) to, at one intraday point, dropping just below $60 (!). (Today it closed at $67).
And, just to add more to the fire, just before the market opened on Monday, Allergan announced FDA filing acceptance for a generic competitor for Xifaxan -- Valeant biggest drug (worth almost $1B/year, originally from Salix). Oh, and if that's not enough, one of the major US presidential candidates started running a TV ad naming Valeant by name and promising to go after them. You can see it here:
http://blogs.wsj.com/moneybeat/2016...-shes-going-after-valeant-in-new-campaign-ad/
Well, lets now wait and see what happens when they miss the grace period and the consequences start hitting.
-- Hope everyone is doing well!
Dan.
Dan You Are the Man! Good to hear from you and yes, I enjoyed your prescient understanding and subsequent proof, "in the current" pudding, of wisdom re:Valeant. Numbers don't lie, people do. Thanks again.
Hi Dan,
Just checking: Isn't Valeant's auditing company Pricewaterhouse Coopers, not Ernst & Young?
Thanks for your reports. Have been following your thread since this all started.
Just checking: Isn't Valeant's auditing company Pricewaterhouse Coopers, not Ernst & Young?
Thanks for your reports. Have been following your thread since this all started.
- Shoham Mar 04, 2016 at 09:30: AM
Shoham
Member
Opps, you are correct. I checked their last annual statement and it was signed by PWC. I didn't see any change of auditors since (and it would be quite controversial to change auditors when under a cloud), so presumably they are still the auditors (unless they've resigned as auditors and it's not public yet -- which would be even more explosive).
I don't know what made me think E&Y.
(Everything else I said still stands, though; PWC is just as respectable as E&Y; and won't risk losing their CPA license and company -- as AA did -- by signing an Enron-like financial statement).
Dan.
definetely not growth Pharma, but better than the Pearson circus.
Dan & 551
This is from this morning; looks like market is in alignment with Dan.
http://finance.yahoo.com/video/faber-report-pfizer-actavis-allergan-
Actavis-Pfizer talks in 2014 make the SEC believe it's been one long discussion. Finally, someone sees the games played by Brent S.
Yours truly
This is from this morning; looks like market is in alignment with Dan.
http://finance.yahoo.com/video/faber-report-pfizer-actavis-allergan-
Actavis-Pfizer talks in 2014 make the SEC believe it's been one long discussion. Finally, someone sees the games played by Brent S.
Yours truly
According to this video and other credible sources there is no evidence that this alleged relationship existed. Seems like a low risk event in terms of SEC. Yes the markets continue to speak in terms of the premium, but it's interesting to me that nobody has articulated any reasons (tangible that is) for the deal not happening. Share price is obviously a barrier but once hurdles clear these same investors who are not supporting the deal will plow in. Still a waiting game with no new updates. There a half a dozen other deals in the same situation. Interesting. Still need to wait and see.
P551
That seems like a "pro-saunders" wish. The facts are the facts, which we have been graced enough from Dan to see. It smells
Like a rotten egg to me and I hope that the machacilan players are exposed for just that. Empty Manipulators
Sulfer is wrenching .regardless of what it masks, there is no escapng it. Thank you Dan for being the arbitor of fresh air. Stay grounded!
Seriously? Just like the infamous "snow day" dinner between Paul Bisarp and BS? Happened like magic. And i am Barney, the pink dinasour. 551 you know better
As you look at the timeline back in April 2014 when after hours trading skyrocket AGN stock due to the Valeant desire to offer to buy the company, Pyott and company already saw dollar signs. I suspect since the Pharma community knows everyone, Pyott had conversations with Saunders and potentially others early on in the event his charade of trying to fight off Ackman/Valeant didn't work. He did do some things that made it look authentic in his actions to ward off the clowns at Valeant, but deep down this was his exit strategy and he knew the $$ he would reap from it. Did Pfizer know about it? How couldn't they?
Billionaire Monopoly.
What a fun game to play in real life with not a care for the little tiny people in the little tiny houses on the board.
"It's all about the patient"