Friday, June 7, 2013

One Fascinating -- But Unverified -- Anonymous Explanation For The Pricing Of the Valeant/Bausch + Lomb Deal

An anonymous commenter just left this -- perhaps explaining at least some part of the back story, on how the Valeant Bausch + Lomb deal may have come together.

"May" is the operative word, here. We likely won't ever know if Mr. Pearson is actually bailing out his old buddy Fred (assuming the below is entirely true; and not apocryphal), by agreeing to overpay, by about 20 per cent for B + L -- and thus save Fred's reputation, by creating an acceptable return on the B + L investment, for Fred's cohorts -- over at Warburg Pincus.

That said, it is certainly the case that Valeant is overpaying here (in my opinion). Want some hard[er] proof? Okay -- thus far, and note that the deal has now been sealed by the boards of both companies -- yet Valeant's. Board. And. Stockholders. Will. Not. Receive. A. Fairness. Opinion.

In a deal this size, where the acquiror is a public company -- a so-called financial fairness opinion, from a banker, would be common here in the States -- to protect the board of the acquiror (here, Valeant) from a stockholders' breach of fiduciary duty claim, if it were (allegedly) a significantly-overpriced deal.

Earlier today, Valeant filed its Canadian preliminary prospectus for the $1.5 to $2 billion issuance of stock, to pay in part for the deal -- and there is no mention of a fairness opinion, on the deal. [It would be too late now, anyway, as the board couldn't say it made the deal contingent on a fairness opinion, now.] Moreover, the merger agreement contains no such condition. That is significant.

Here is the comment I mentioned at the top, in full:

. . . . In 2003, during the transition from Dick Kogan to Fast Fred, J. Michael Pearson was the first person that Fred sent in. If you recall, Fred was still waiting for the Pharmacia merger to complete before he could join SP in August. Bertolini helped Fred out with the Pharmacia Financial Audit and Pearson helped Fred and Bob out with VEI at SP (saving over $1B in cuts). (Did they ever sell the Gulfstream IV?) Pearson left McKinsey to head up Valeant, so now it seems he is just helping out an old buddy. . . .

Anonymous at 9:13 PM, July 7, 2013. . . .

Anyone else have any additional local color, on that 2003 time-frame? If you do, I'll print it.

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