Botox Maker Allergan Pleaded for Goldman’s Help in Valeant Fight
By DAVID GELLES OCTOBER 24, 2014 4:39 PMOctober 24, 2014 4:39 pm Comment
This summer, as Allergan, the maker of Botox, was coming under increased pressure to sell itself to Valeant Pharmaceuticals and the hedge fund Pershing Square Capital Management, its executives grew tired of playing defense. They wanted their advisers at Goldman Sachs to take the fight to Valeant.
“I need Goldman to take off its white hat and put on a darker one,” Jeff Edwards, Allergan’s chief financial officer at the time, wrote in an email to one of his advisers at Goldman Sachs.
That email was part of a trove of documents recently unsealed as part of a related insider trading case being heard in a California court. The emails, between Allergan executives and their advisers at Goldman Sachs and Bank of America Merrill Lynch, portray a company scrambling to fend off an unwanted takeover bid, even before the offer is publicly made.
Valeant, based in Canada, and Pershing Square did not go public with their offer for Allergan until April 22. But on March 4, Mr. Edwards and a colleague at Allergan were already discussing “takeover defense” and a strategy of “attacking the balance sheet” of Valeant if it were to make an offer.
That exchange appears to contradict other statements made by Allergan’s chief executive, David Pyott, in which he has said that Allergan didn’t prepare for a Valeant offer before it was formally made in April.
Once the takeover battle was underway, Allergan was quickly under pressure from Valeant and Pershing Square, the hedge fund run by William A. Ackman.
In May, after Mr. Ackman filed a lengthy letter that outlined his accusations of corporate governance failures by Allergan, Mr. Edwards told his advisers at Goldman Sachs that it was “time to take the gloves off” and urged them to go on the offensive against Mr. Ackman and Valeant.
But James Katzman, a Goldman banker working on the deal for Allergan, said, “Let’s just not get drawn into his game.”
Mr. Edwards, however, was not appeased, expressing concern that the tactics by Valeant and Pershing Square would succeed, leaving Allergan vulnerable to a takeover.
“They will continue repeating the same message because they know it will eventually sink in and stick, particularly when they raise or improve,” Mr. Edwards wrote. “The fact is they will demolish the company and destroy long-term value. They will cover this all up within a few years by doing the next deal. We simply cannot allow this value destructing deal to occur, and I need Goldman to take off its white hat and put on a darker one.”
But throughout the lengthy takeover battle, bankers from Goldman Sachs have declined to put on a darker hat, possibly conscious of their own firm’s endorsement of Valeant through research and underwriting. Instead, Goldman Sachs has let consultants and Allergan itself sling mud at Valeant and Pershing Square.
Behind the scenes, Allergan remained committed to discrediting Valeant as a worthwhile acquirer, hoping both to drive down its stock price and to persuade its own shareholders that they shouldn’t accept Valeant stock as part of a deal.
In an exchange from June, Allergan executives and their advisers from Bank of America Merrill Lynch appear to discuss efforts to push down Valeant’s stock. Writing on June 12, Albert Hwang, a Bank of America managing director, wrote to Mr. Edwards suggesting that Mr. Pyott, Allergan’s chief, had taken credit for driving down Valeant’s stock price and that the price would drop further.
Mr. Edwards stepped down as Allergan’s chief financial officer in August, citing family obligations.
In the emails and documents, Allergan is referred to as “Apollo” and Valeant is known as “Venus.”
And while Allergan has clearly tried to discredit Valeant as a legitimate acquirer, nowhere in the documents is there a smoking gun that proves Mr. Ackman’s claims that Allergan knowingly put forward information it believed to be untrue.
One of the most peculiar email exchanges appears to describe Allergan’s successful efforts to have an article about Valeant’s takeover bid retracted from a publication known as Ophthalmology Management. The story was published in early August and largely described Valeant’s point of view.
Mr. Pyott described the article as a “pathetic piece of reporting.” Soon after that, Allergan executives discussed who on the Ophthalmology Management board was considered an ally. Days later, citing Ophthalmology Management’s “longstanding relationship with Allergan,” the publication withdrew the article.
Doug Parry, the publisher of Ophthalmology Management, recalled 18,200 printed copies containing the article and pledged to have them destroyed. The article was removed from the publication’s website. And the author, who was also an editor at Ophthalmology Management, was “released of his role with the publication.”
Despite months of maneuvering, the fate of Allergan remains unresolved. Valeant and Pershing Square continue to pursue the company and are considering raising their bid. Allergan continues to explore other deals that would scuttle the takeover attempt by Valeant and Pershing Square. A special meeting is set for late December, when Allergan shareholders will get to vote on the offer, if it still standing by then.
By DAVID GELLES OCTOBER 24, 2014 4:39 PMOctober 24, 2014 4:39 pm Comment
This summer, as Allergan, the maker of Botox, was coming under increased pressure to sell itself to Valeant Pharmaceuticals and the hedge fund Pershing Square Capital Management, its executives grew tired of playing defense. They wanted their advisers at Goldman Sachs to take the fight to Valeant.
“I need Goldman to take off its white hat and put on a darker one,” Jeff Edwards, Allergan’s chief financial officer at the time, wrote in an email to one of his advisers at Goldman Sachs.
That email was part of a trove of documents recently unsealed as part of a related insider trading case being heard in a California court. The emails, between Allergan executives and their advisers at Goldman Sachs and Bank of America Merrill Lynch, portray a company scrambling to fend off an unwanted takeover bid, even before the offer is publicly made.
Valeant, based in Canada, and Pershing Square did not go public with their offer for Allergan until April 22. But on March 4, Mr. Edwards and a colleague at Allergan were already discussing “takeover defense” and a strategy of “attacking the balance sheet” of Valeant if it were to make an offer.
That exchange appears to contradict other statements made by Allergan’s chief executive, David Pyott, in which he has said that Allergan didn’t prepare for a Valeant offer before it was formally made in April.
Once the takeover battle was underway, Allergan was quickly under pressure from Valeant and Pershing Square, the hedge fund run by William A. Ackman.
In May, after Mr. Ackman filed a lengthy letter that outlined his accusations of corporate governance failures by Allergan, Mr. Edwards told his advisers at Goldman Sachs that it was “time to take the gloves off” and urged them to go on the offensive against Mr. Ackman and Valeant.
But James Katzman, a Goldman banker working on the deal for Allergan, said, “Let’s just not get drawn into his game.”
Mr. Edwards, however, was not appeased, expressing concern that the tactics by Valeant and Pershing Square would succeed, leaving Allergan vulnerable to a takeover.
“They will continue repeating the same message because they know it will eventually sink in and stick, particularly when they raise or improve,” Mr. Edwards wrote. “The fact is they will demolish the company and destroy long-term value. They will cover this all up within a few years by doing the next deal. We simply cannot allow this value destructing deal to occur, and I need Goldman to take off its white hat and put on a darker one.”
But throughout the lengthy takeover battle, bankers from Goldman Sachs have declined to put on a darker hat, possibly conscious of their own firm’s endorsement of Valeant through research and underwriting. Instead, Goldman Sachs has let consultants and Allergan itself sling mud at Valeant and Pershing Square.
Behind the scenes, Allergan remained committed to discrediting Valeant as a worthwhile acquirer, hoping both to drive down its stock price and to persuade its own shareholders that they shouldn’t accept Valeant stock as part of a deal.
In an exchange from June, Allergan executives and their advisers from Bank of America Merrill Lynch appear to discuss efforts to push down Valeant’s stock. Writing on June 12, Albert Hwang, a Bank of America managing director, wrote to Mr. Edwards suggesting that Mr. Pyott, Allergan’s chief, had taken credit for driving down Valeant’s stock price and that the price would drop further.
Mr. Edwards stepped down as Allergan’s chief financial officer in August, citing family obligations.
In the emails and documents, Allergan is referred to as “Apollo” and Valeant is known as “Venus.”
And while Allergan has clearly tried to discredit Valeant as a legitimate acquirer, nowhere in the documents is there a smoking gun that proves Mr. Ackman’s claims that Allergan knowingly put forward information it believed to be untrue.
One of the most peculiar email exchanges appears to describe Allergan’s successful efforts to have an article about Valeant’s takeover bid retracted from a publication known as Ophthalmology Management. The story was published in early August and largely described Valeant’s point of view.
Mr. Pyott described the article as a “pathetic piece of reporting.” Soon after that, Allergan executives discussed who on the Ophthalmology Management board was considered an ally. Days later, citing Ophthalmology Management’s “longstanding relationship with Allergan,” the publication withdrew the article.
Doug Parry, the publisher of Ophthalmology Management, recalled 18,200 printed copies containing the article and pledged to have them destroyed. The article was removed from the publication’s website. And the author, who was also an editor at Ophthalmology Management, was “released of his role with the publication.”
Despite months of maneuvering, the fate of Allergan remains unresolved. Valeant and Pershing Square continue to pursue the company and are considering raising their bid. Allergan continues to explore other deals that would scuttle the takeover attempt by Valeant and Pershing Square. A special meeting is set for late December, when Allergan shareholders will get to vote on the offer, if it still standing by then.