How do you think this delay would affect the PFE/AGN merger, if it happens? Brent had mentioned a target completion of July, so does this still seem feasible, or will it be more like end of the year? All speculative I guess, but any thoughts?
Glossary of Hostile Takeover Terms with Discussion
- Thread starter Shoham
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How do you think this delay would affect the PFE/AGN merger, if it happens? Brent had mentioned a target completion of July, so does this still seem feasible, or will it be more like end of the year? All speculative I guess, but any thoughts?
My 2 cents is the Teva delay till June totally disrupts the AGN/PFE timeline. Unless spread gets better, no way this deal happens with Pfizer. Shareholders don't see the value. Better off if AGN is independent.
- Shoham Mar 16, 2016 at 02:34: PM
Shoham
Member
There are a lot of moving parts in a merger this big. Some represent risk factors to completion, others just to timing. I don't see Teva as a risk factor to completion. When all the pieces are finally assembled, it might be that Teva would end up being the last cog to snap into place (probably not by much), or something else might turn out to take even longer. Hard for an outsider to divine.
But none of that is really important. There is really one issue and one issue only here: Can management get the shareholders to vote in favor of the deal (both AGN and PFE)?. If they can, everything else is just details; if not, there will be no deal.
Right now, between the weak value creation, the big margin, the tepid investor communications, lack of voting date scheduled (unless I missed it), and large shareholders' pronouncements against the price; I'm having a hard time seeing how management is planning to conquer this barrier.
If you want to have a wedding in July, it's nice to know that you are working the details for the ceremony and reception, but when are you planning to ask the bride and groom if they want to hitch?
Dan.
all the price gains of the Pfizer buyback have faded. No deal!!
- Shoham Mar 16, 2016 at 07:32: PM
Shoham
Member
Nice WSJ article where they (finally) admit that the (old) Allergan directors were right to reject Valeant...
http://blogs.wsj.com/moneybeat/2016...r-vindicates-allergan-directors/?mod=yahoo_hs
http://blogs.wsj.com/moneybeat/2016...r-vindicates-allergan-directors/?mod=yahoo_hs
Unless there is a legal roadblock this deal IS happening. I don't care about stock price analysis and value creation arguments. This deal will get shoved down shareholders throats. Period. PFE will throw more shares, more cash, more something at AGN. The PFE shareholders are a pushover. They haven't experienced growth since Clinton was in office so any hint or sniff that AGN offers a chance at growth and they will cave. It's the AGN shareholders that count and at some level of deal they will vote yes too. Just wait and see.
Well I hope you're right but I own a sizable amount of AGN stock and there is no way in hell it gets my vote at current numbers. I'm sure I'm not alone in this thought either.
So the deal is AGN doing an 11.3 for 1 stock split, and PFE taking $17B, or 500M shares off the table, and you get to 44%/56% split.
My question, why does everyone just assume the new PFE PLC stock will trade at the old PFE price? I would think investors would take the market cap of both companies, and divide by the outstanding shares. This will result in a weighted average price, which brings Allergan up (slightly), and PFE down. The only way you get back to the old PFE price, is if you take Brent and Ian at their word for the EPS accretion in 2020+ (see the math below). If investors don't believe them, which I doubt they do, you end up at a much lower PFE PLC share price post close.
Let use market caps from today.
AGN - $107.5B (394M shares outstanding)
PFE - $179.3B (6.2B shares outstanding)
minus PFE $5B buyback
minus PFE $12B buyback through the closing process
PFE pre close - $162.3B (5.6B shares outstanding)
AGN pre close, post split - $107.5B (4.45B shares, at $24.14 a share)
PFE PLC - $269.8B (10B shares outstanding) => $26.87 share price
They claim 10% accretion to PFE EPS by 2019, high-teens by 2020. Let's assume investors believe that, without any proof, that's 18%*162B discounted for four years (at, let's say 6%) = $23B in accretion.
So $269.8B + $23B = $292.8B (10B shares outstanding) => $29.28 share price, or essentially where PFE price closed today. I find it very coincidental that if you take Brent and Ian at their word for the assumed accretion, it gets you back to PFE closing prices. Plus, they have yet to articulate how the accretion will be achieved.
My question, why does everyone just assume the new PFE PLC stock will trade at the old PFE price? I would think investors would take the market cap of both companies, and divide by the outstanding shares. This will result in a weighted average price, which brings Allergan up (slightly), and PFE down. The only way you get back to the old PFE price, is if you take Brent and Ian at their word for the EPS accretion in 2020+ (see the math below). If investors don't believe them, which I doubt they do, you end up at a much lower PFE PLC share price post close.
Let use market caps from today.
AGN - $107.5B (394M shares outstanding)
PFE - $179.3B (6.2B shares outstanding)
minus PFE $5B buyback
minus PFE $12B buyback through the closing process
PFE pre close - $162.3B (5.6B shares outstanding)
AGN pre close, post split - $107.5B (4.45B shares, at $24.14 a share)
PFE PLC - $269.8B (10B shares outstanding) => $26.87 share price
They claim 10% accretion to PFE EPS by 2019, high-teens by 2020. Let's assume investors believe that, without any proof, that's 18%*162B discounted for four years (at, let's say 6%) = $23B in accretion.
So $269.8B + $23B = $292.8B (10B shares outstanding) => $29.28 share price, or essentially where PFE price closed today. I find it very coincidental that if you take Brent and Ian at their word for the assumed accretion, it gets you back to PFE closing prices. Plus, they have yet to articulate how the accretion will be achieved.
- Shoham Mar 17, 2016 at 12:27: AM
Shoham
Member
Call me old fashioned, if you will; but I continue to believe that boards of legitimate companies actually do serve the shareholders (to see what happen when they don't, and uncritically let the CEO have their way, take a look at Valeant).
Yes, if Pfizer raises the price it is willing to pay Allergan, it will eventually become in Allergan shareholders' interest to close the deal; but that will be at the expense of Pfizer shareholders. When there is solid value creation involved, it is possible to make both sides win; but if the value creation is so weak that in order to get one group of shareholders to agree, you need to make the other one lose, a deal is not possible. The PFE board, if they are doing their job -- and I have no reason to think they aren't -- will not approve raising the bid so high as to actually reduce the value held by the (current) PFE shareholders. (In fact, looking at the articulated value creation, they already allocated most of the gain the AGN shareholders; unless there is a re-articulation with higher value creation, there is no room to further raise the price. It is a testament to the weakness of the value creation that even when the lion share of it is handed to AGN, the price is still unattractive to many shareholders).
Lack of growth at PFE is a problem, but it is not the worst thing in the world. A profitable non-growing company can still serve the interests of it's shareholders just fine (your corner gas station, dry cleaner, sandwich shop, and most small businesses are probably profitable non-growing companies that are serving their shareholders just fine -- Pfizer may be bigger and more complex, but the economic logic is no different). If Pfizer can find a value-creating way to grow (through acquisition or internal investment), great; if not, it's not a reason to overpay for anything.
Dan.
I agree with Dan and believe Wall Street does too. There is a fiducary responsibility which is tied to the law. Regardless of what BS and Read want, they have not "spun" a strong enough story to justify the merger. I believe AGN will be fine on it's own but will need a real CEO who knows how to run a company. Not just package & sell which is the only thing BS knows.
My 2 cents! Thanks to all the legitimate and intelligent posters,Dan &551 in particular
I agree Dan. While we have been on slightly different "sides" on this deal (you on the "less filling" and me on the "tastes great") we have both been stating that the major responsibility incumbent on Read and Saunders was communicating why this deal should happen. To date this has not really happened which could very likely mean there is no compelling reason beyond the fact that they want it to happen! I still believe they each hold sway over their shareholders but there is a limit to how convincing they can be, clearly. I also agree with your take on growth vs non growth. The jaded side of me unfortunately is convinced that many on Wall Street don't view it this way - hence all the financially engineered problems we face today (don't get me started on the loose money policy of the Fed and the badness is promotes).
There is pressure for CEO's to grow or die so this deal has momentum for that reason. I do think AGN can be fine on its own but I seriously question the attainment of pro forma growth levels that have been put out there for an independent AGN. My concern (which is partly what makes me want to be on the + side of the PFE deal) is that Saunders will need to go after another deal to keep up the growth because organically AGN can't get there on its own. Not to mention that this is how he appears to be wired! In many ways PFE is a get out jail free card for AGN (probably exaggerated to make my point) or at least a path of least resistance (Saunders can hide behind the bigger kid when the stuff hits the fan) and in no doubt the deal is better for AGN than PFE in the short term. It's too bad really because from what I hear through the grapevine an increasing amount of energy inside both companies is being devoted to merger activities, org changes, etc., but on the outside the world is seeing this deal as a no go. A bit of Alice in Wonderland really. As we keep stating time will tell, but if the deal is going to happen the value creation spin machine (I say spin because there doesn't seem to be any real value creation that has been communicated) needs to go into hyper drive very soon. The deal premium will narrow on its own as we get closer, but even so it appears to be a bridge too far as far as getting a favorable yes vote.
P551
- Shoham Mar 17, 2016 at 01:29: PM
Shoham
Member
I don't like printing money either, but unless Americans start having a lot more babies, I don't see what else the Fed can do. When it comes to national economies, there is no "zero-growth" option (look at Europe and Japan).
Oooh, did I just open a can of worms?
Dan.
- Shoham Mar 17, 2016 at 05:49: PM
Shoham
Member
So, for those who are following Valeant, here are some more thoughts.
When Valeant missed the grace period for filing audited financial statements, as anticipated here, things got calamitous fairly quickly (down 50%+ on that day, from already-multi-year low, another 10%+ today). Valeant has now surpassed Enron in shareholder losses.
The official reason, as filed with the SEC, for missing the deadline (and for not having a target date) is that the "Ad Hoc Committee" has not finished it's investigation. The Ad Hoc Committee, as those who follow this story recall, was created to investigate the accounting issues associated with Philidor when that debacle exploded (October-November 2015). The committee is composed of and reports to the Board of Directors.
I am going to call "Bull" on this excuse.
The AHC was not appointed by, required by, or reports to the external auditors (PWC). While everything and anything they find (or fail to find) needs to be brought to the attention of the auditors, the audited report is never contingent on their findings. The auditors are perfectly capable -- in fact, are absolutely required -- to do all the investigations themselves. That's why we have independent auditors to begin with. Additionally, whatever charter the AHC was given; endangering the company's continued existence through lack of timeliness surely wasn't part of it. Even if it didn't have a pre-grace-period-expiration deadline to begin with, such would surely have been added by the Board afterward. If AHC slowness was really the issue here, and their report was really the missing piece for the audited financials, the Board would have immediately issued an order for the AHC to finish immediately and report whatever they got so far. It's not pretty ordering a quasi-independent internal investigation to finish before they say they are finished; but the mortal danger to the company's existence trumps prettiness.
So, what's really the holdup? It's not that they haven't finished collecting the data or doing the math -- they just released their (unaudited) Q4 numbers. The annual report is just the sum of the 4 quarterly reports (ok, with some adjustments of various kind, but nothing that good accounting software can't do in seconds). (There is also a bit of restatement, but that's already computed and disclosed). It's not that PWC hasn't finished their audit. Major auditing firms (such as PWC) are very good with finishing on time, particularly when they have been auditing the same client for a long time. They are never going to let a client miss a deadline, let alone a grace period, on their account (even if they need to pay everyone double-overtime). It's not even a disagreement over accounting fine points or rules interpretations -- the just released Q4 numbers, undoubtable, were compiled under interpretations that PWC is cool with (otherwise they'd have to disclose).
The reason for the holdup better be good. They are already in technical default with the SEC and stock exchanges (meaning they are subject to delisting), they will enter technical default with their borrowers in about a month. At that point, if 25% of the owners of any of the many bonds they issued demands it, the company has to immediately pay off the entire amount. If they pay off even one such bondholder, then all their bonds immediately become due and payable. Whatever you think about their future prospects, one thing is for sure, they don't have the cash to immediately pay off all their bonds (about $31-34B, depending how one counts it). Valeant, undoubtedly, is already furiously negotiating with creditors, but, in my opinion, that's a hopeless endeavor. Some of their debt is now selling for $0.70 on the dollar. All it takes is one spoiler (and some hedge funds specialize in this) to buy up 25% of one bond issue at $0.70 on the dollar and then demand to be paid the full $1.00 (making a 40%+ return on investment) to render all such negotiations moot.
So, what (in my opinion) is the real reason for the holdup?
Two words: Going Concern
To those familiar with accounting speak, those are perhaps the two most explosive words in the lingo (did I just say accounting and explosive in the same sentence?). To quote some of my favorite movies, it's "Tora Tora Tora," "Houston, we have a problem," and "Game over, man" combined (can you name all 3 movies?).
After such a colorful introduction, where do you find these words and what do they mean? They appear in the auditors report and they mean that the auditors are uncertain that the company is capable of meeting its obligations and continue to operate.
Perhaps a few words about auditor reports are now merited: Auditors, after spending thousands of man-hours conducting an audit, issue remarkably short reports. A standard (unqualified) Audit report only has 3 sentences, and the first two say nothing meaningful (just that we did an audit); the third sentence provides the result of the audit, and it, too, doesn't say anything meaningful (just that the audit was successful). Every CPA candidate memorizes the exact wordings of the third sentence: It says "In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2015, and the results of its operations and its cash flows for the year then ended in accordance with generally accepted accounting principles in the United States of America." That's it. It doesn't say if the company is doing well or badly, if management is good or bad, if the future prospects are bright or dark. None of that. All the auditors are saying is that the retrospective numbers management presented in the financial statements are legit. Whether those numbers are good or bad, and what they imply regarding the future of the company, that's for the investors to decide.
Whereas the audit process is entirely retrospective -- it only looks at what has already transpired, never try to divine what will be -- there is one super-important exception to this guideline: The auditors must examine the company's ability to continue as a "going concern" into the intermediate future (often, but not exclusively, defined as 12 months). If not, they need to add the dreaded "going concern" fourth sentence "The accompanying financial statements have been prepared assuming that the Company will continue as a going concern." followed by a brief explanation of why it might not be and what might happen then.
Just about every bond covenant has a clause that instantly puts the company into default whenever there is a Going Concern.
So, if the PWC report is indeed complete, and it has a Going Concern Disclosure, that would be a good enough reason to not to release it even after the grace period expired. What's the worst that can happen (from Valeant's perspective) by not releasing it? -- going into bond default a month from now (and only after someone got 25% of the bonds of any one issue to ask for it). If they do release it? Instant default, today.
Before we get too carried away with this speculation, though, let's take a step back. The 201Q4 numbers were bad, and the 2016 guidance is even worst, but Going Concern Disclosure? Isn't that taking things a bit far? Given that issuing a Going Concern Disclosure can easily become a self-fulfilling prophecy, wouldn't PWC think twice before signing the death warrant of a big client? (Although given what happened to AA after Enron, signing a death warrant might be safer for PWC than letting Valeant out on parole).
Here is where I go back to my comments about Valeant at the height of the Allergan takeover battle: I said that without (ever larger) acquisitions, the facts that they destroy value would come to the surface. They bought all their assets with debt, outbidding everyone else and using more expensive cash (meaning higher interest rates) than everyone else (even in their best days, their bonds were junk, whereas the rest of big Pharma, including Allergan and Pfizer, were A+). They were able to do this because they maintained a mystique that they can extract value better than anyone else. Now that the mystique is debunked, and it is clear that rather than shepherd the assets they bought, they destroyed value; those assets are likely worth less than what was borrowed to buy them. Said another way, they can't generate enough profits from what's left of those assets, nor sell them, to fully cover the incurred debt. If, as I'm speculating, PWC did this math and reached this conclusion, then we are in Going Concern territory.
[to continue shortly]
When Valeant missed the grace period for filing audited financial statements, as anticipated here, things got calamitous fairly quickly (down 50%+ on that day, from already-multi-year low, another 10%+ today). Valeant has now surpassed Enron in shareholder losses.
The official reason, as filed with the SEC, for missing the deadline (and for not having a target date) is that the "Ad Hoc Committee" has not finished it's investigation. The Ad Hoc Committee, as those who follow this story recall, was created to investigate the accounting issues associated with Philidor when that debacle exploded (October-November 2015). The committee is composed of and reports to the Board of Directors.
I am going to call "Bull" on this excuse.
The AHC was not appointed by, required by, or reports to the external auditors (PWC). While everything and anything they find (or fail to find) needs to be brought to the attention of the auditors, the audited report is never contingent on their findings. The auditors are perfectly capable -- in fact, are absolutely required -- to do all the investigations themselves. That's why we have independent auditors to begin with. Additionally, whatever charter the AHC was given; endangering the company's continued existence through lack of timeliness surely wasn't part of it. Even if it didn't have a pre-grace-period-expiration deadline to begin with, such would surely have been added by the Board afterward. If AHC slowness was really the issue here, and their report was really the missing piece for the audited financials, the Board would have immediately issued an order for the AHC to finish immediately and report whatever they got so far. It's not pretty ordering a quasi-independent internal investigation to finish before they say they are finished; but the mortal danger to the company's existence trumps prettiness.
So, what's really the holdup? It's not that they haven't finished collecting the data or doing the math -- they just released their (unaudited) Q4 numbers. The annual report is just the sum of the 4 quarterly reports (ok, with some adjustments of various kind, but nothing that good accounting software can't do in seconds). (There is also a bit of restatement, but that's already computed and disclosed). It's not that PWC hasn't finished their audit. Major auditing firms (such as PWC) are very good with finishing on time, particularly when they have been auditing the same client for a long time. They are never going to let a client miss a deadline, let alone a grace period, on their account (even if they need to pay everyone double-overtime). It's not even a disagreement over accounting fine points or rules interpretations -- the just released Q4 numbers, undoubtable, were compiled under interpretations that PWC is cool with (otherwise they'd have to disclose).
The reason for the holdup better be good. They are already in technical default with the SEC and stock exchanges (meaning they are subject to delisting), they will enter technical default with their borrowers in about a month. At that point, if 25% of the owners of any of the many bonds they issued demands it, the company has to immediately pay off the entire amount. If they pay off even one such bondholder, then all their bonds immediately become due and payable. Whatever you think about their future prospects, one thing is for sure, they don't have the cash to immediately pay off all their bonds (about $31-34B, depending how one counts it). Valeant, undoubtedly, is already furiously negotiating with creditors, but, in my opinion, that's a hopeless endeavor. Some of their debt is now selling for $0.70 on the dollar. All it takes is one spoiler (and some hedge funds specialize in this) to buy up 25% of one bond issue at $0.70 on the dollar and then demand to be paid the full $1.00 (making a 40%+ return on investment) to render all such negotiations moot.
So, what (in my opinion) is the real reason for the holdup?
Two words: Going Concern
To those familiar with accounting speak, those are perhaps the two most explosive words in the lingo (did I just say accounting and explosive in the same sentence?). To quote some of my favorite movies, it's "Tora Tora Tora," "Houston, we have a problem," and "Game over, man" combined (can you name all 3 movies?).
After such a colorful introduction, where do you find these words and what do they mean? They appear in the auditors report and they mean that the auditors are uncertain that the company is capable of meeting its obligations and continue to operate.
Perhaps a few words about auditor reports are now merited: Auditors, after spending thousands of man-hours conducting an audit, issue remarkably short reports. A standard (unqualified) Audit report only has 3 sentences, and the first two say nothing meaningful (just that we did an audit); the third sentence provides the result of the audit, and it, too, doesn't say anything meaningful (just that the audit was successful). Every CPA candidate memorizes the exact wordings of the third sentence: It says "In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2015, and the results of its operations and its cash flows for the year then ended in accordance with generally accepted accounting principles in the United States of America." That's it. It doesn't say if the company is doing well or badly, if management is good or bad, if the future prospects are bright or dark. None of that. All the auditors are saying is that the retrospective numbers management presented in the financial statements are legit. Whether those numbers are good or bad, and what they imply regarding the future of the company, that's for the investors to decide.
Whereas the audit process is entirely retrospective -- it only looks at what has already transpired, never try to divine what will be -- there is one super-important exception to this guideline: The auditors must examine the company's ability to continue as a "going concern" into the intermediate future (often, but not exclusively, defined as 12 months). If not, they need to add the dreaded "going concern" fourth sentence "The accompanying financial statements have been prepared assuming that the Company will continue as a going concern." followed by a brief explanation of why it might not be and what might happen then.
Just about every bond covenant has a clause that instantly puts the company into default whenever there is a Going Concern.
So, if the PWC report is indeed complete, and it has a Going Concern Disclosure, that would be a good enough reason to not to release it even after the grace period expired. What's the worst that can happen (from Valeant's perspective) by not releasing it? -- going into bond default a month from now (and only after someone got 25% of the bonds of any one issue to ask for it). If they do release it? Instant default, today.
Before we get too carried away with this speculation, though, let's take a step back. The 201Q4 numbers were bad, and the 2016 guidance is even worst, but Going Concern Disclosure? Isn't that taking things a bit far? Given that issuing a Going Concern Disclosure can easily become a self-fulfilling prophecy, wouldn't PWC think twice before signing the death warrant of a big client? (Although given what happened to AA after Enron, signing a death warrant might be safer for PWC than letting Valeant out on parole).
Here is where I go back to my comments about Valeant at the height of the Allergan takeover battle: I said that without (ever larger) acquisitions, the facts that they destroy value would come to the surface. They bought all their assets with debt, outbidding everyone else and using more expensive cash (meaning higher interest rates) than everyone else (even in their best days, their bonds were junk, whereas the rest of big Pharma, including Allergan and Pfizer, were A+). They were able to do this because they maintained a mystique that they can extract value better than anyone else. Now that the mystique is debunked, and it is clear that rather than shepherd the assets they bought, they destroyed value; those assets are likely worth less than what was borrowed to buy them. Said another way, they can't generate enough profits from what's left of those assets, nor sell them, to fully cover the incurred debt. If, as I'm speculating, PWC did this math and reached this conclusion, then we are in Going Concern territory.
[to continue shortly]
- Shoham Mar 17, 2016 at 05:50: PM
Shoham
Member
[continued]
So, what's next: Ackman is right (for a change) that Valeant needs to start liquidating and fast. Don't worry about "core" and "non-core" (as MP is still muttering), sell anything you can get a decent price for. If enough is sold between now and when the debt holders will have the right to demand early payment (a bit over a month from now), it might be possible to remove the Going Concern language (technically, the language is as-of the last day of 2015, but Auditors can have a bit of leeway, say, if the company raised a ton of cash through asset sales in early 2016, to conclude that, actually, they were not a going concern risk on 12/31/2015 after all); or to buy down a lot of debt. Unfortunately, for them, between the taint on all their assets and the fire sale situation, this is going to be very tough. Additionally, two of the largest potential buyers, Allergan and Pfizer, can't easily buy anything until their own merger either closes or breaks. Valeant will probably get some bond holders to give them more time, but unless they get every last one of them (75%+ in each bond issue), it's worthless (but they'll still make a big announcement out of it).
One last thought: I've previously accused Valeant (in the middle of the Allergan takeover battle), when they lowered guidance, of swallowing more poison than they needed to; so, on the next quarter they can beat guidance and raise future guidance to have momentum going into the Allergan special shareholder meeting (which ended up never happening). I was right then. They did, the very next quarter, beat their lowered guidance and raised future guidance (giving their share price a bump as big as the earlier drop -- even though the "raise" was to a lower level than the prior drop). Allow me to go on record making this accusation again. I think that the 2016 guidance is deliberately lowered more than necessary, so once they get out of the immediate default risk emergency, they can start raising guidance and make it look like they are on an upswing. However, this time, I don't think it'll work. First, because I don't think they'll pull out to begin with -- I think they'll end up in bankruptcy and asset liquidation (unless they manage to sell off a lot of assets beforehand; it which case the guidance is meaningless anyhow). And, second, even, if by some miracle they do pull out without massive asset sales, the damage they are doing now exceeds whatever "momentum" they'll have later. Also, the momentum thing only works when management has credibility, and this one no longer has any.
Dan.
So, what's next: Ackman is right (for a change) that Valeant needs to start liquidating and fast. Don't worry about "core" and "non-core" (as MP is still muttering), sell anything you can get a decent price for. If enough is sold between now and when the debt holders will have the right to demand early payment (a bit over a month from now), it might be possible to remove the Going Concern language (technically, the language is as-of the last day of 2015, but Auditors can have a bit of leeway, say, if the company raised a ton of cash through asset sales in early 2016, to conclude that, actually, they were not a going concern risk on 12/31/2015 after all); or to buy down a lot of debt. Unfortunately, for them, between the taint on all their assets and the fire sale situation, this is going to be very tough. Additionally, two of the largest potential buyers, Allergan and Pfizer, can't easily buy anything until their own merger either closes or breaks. Valeant will probably get some bond holders to give them more time, but unless they get every last one of them (75%+ in each bond issue), it's worthless (but they'll still make a big announcement out of it).
One last thought: I've previously accused Valeant (in the middle of the Allergan takeover battle), when they lowered guidance, of swallowing more poison than they needed to; so, on the next quarter they can beat guidance and raise future guidance to have momentum going into the Allergan special shareholder meeting (which ended up never happening). I was right then. They did, the very next quarter, beat their lowered guidance and raised future guidance (giving their share price a bump as big as the earlier drop -- even though the "raise" was to a lower level than the prior drop). Allow me to go on record making this accusation again. I think that the 2016 guidance is deliberately lowered more than necessary, so once they get out of the immediate default risk emergency, they can start raising guidance and make it look like they are on an upswing. However, this time, I don't think it'll work. First, because I don't think they'll pull out to begin with -- I think they'll end up in bankruptcy and asset liquidation (unless they manage to sell off a lot of assets beforehand; it which case the guidance is meaningless anyhow). And, second, even, if by some miracle they do pull out without massive asset sales, the damage they are doing now exceeds whatever "momentum" they'll have later. Also, the momentum thing only works when management has credibility, and this one no longer has any.
Dan.
Thank You, Thank You, Thank You for the education and considerate postings!! Same to 551. You have helped me become more a better thinker, not just about the M&A's but finance and my own personal finances/portfolio in general. Happy St. Patrick's Day, May the Irish Saints bless you
Dan,
Great comments. I admit I haven't followed much on VRX lately so I'm not fluent on their financials but I'd be very curious how the audit will handle what I imagine is a high Goodwill on the B/S. I'd be shocked if VRX doesn't have to reserve for what is likely a high probability write down given how much they paid for their target companies. If this happens then there could be another impact to an already troubled BS and P&L. It will take one hell of a tale of fiction to justify any Goodwill so I'm waiting anxiously to see what comes out. I'll look later to see what I can find on their books.
P551
So there is ~$9.3B of Goodwill and ~$11.25B of Intangible assets as of FY2014. I have to believe these entries are being severely scrutinized. We might be seeing some impairment charges coming out! Watch out
P551
There are days when I feel enormous frustration for having integrity and living my life with scruples and boundaries. Today is a day that I read and heard about people who portend to share my beliefs but lack the character or strength to act as they speak. My empathy for all the people who will be impacted as a result of their management. And I rest my head on a pillow, with a peace that is priceless.So there is ~$9.3B of Goodwill and ~$11.25B of Intangible assets as of FY2014. I have to believe these entries are being severely scrutinized. We might be seeing some impairment charges coming out! Watch out
P551
I second everything this poster said about Dan and 551. We have learnt more from this thread about the nuances of all these financial transactions and scandals than from anything else. All those so called highly paid financial analysts cannot hold a candle to the depth of understanding that you guys have.
Thank you. Thank you. Thank you.
So there is ~$9.3B of Goodwill and ~$11.25B of Intangible assets as of FY2014. I have to believe these entries are being severely scrutinized. We might be seeing some impairment charges coming out! Watch out
P551
Please explain. What does goodwill and intangible assets mean?