By Michael Flaherty
Oct 27 (Reuters) - Activist firm ValueAct is meeting with
other large investors in Valeant Pharmaceuticals (N:VRX) International
VRX.N , as the company aims to rally support amid allegations
of improper accounting and aggressive pricing.
Mason Morfit, a partner at ValueAct, rejoined the board of
Valeant on Monday and shortly afterwards started meeting with
representatives from the company's top ten investors, a person
familiar with the matter said on Tuesday.
Valeant shares have plunged more than 50 percent since their
August peak after U.S. Democratic politicians took aim at the
company's pricing policies. A federal subpoena followed and then
last Wednesday, short-seller Andrew Left issued a report
claiming fraud at Valeant, sending shares into a tailspin.
Valeant laid out a detailed defense on Monday of its
relationship with specialty pharmacy Philidor - the firm at the
center of Left's accusations.
Valeant has said it properly accounts for sales through its
pharmacy partners and only books revenue once one of its
medicines reaches a patient. urn:newsml:reuters.com:*:nL1N12QOSE
Morfit, who served on Valeant's board from 2007 to 2014, is
expected to reiterate that message in his meetings, which may
extend to smaller shareholders, said the person, who did not
want to be identified because the discussions are confidential.
Valeant's top ten shareholders include Ruane, Cunniff and
Goldfarb, T. Rowe Price, Paulson & Co, and Lone Pine Capital.
Morfit stepped down from the board in May 2014, in part
because he had just joined the Microsoft Corp MSFT.O board and
wanted to dedicate his efforts there, he said at the time. Four
months later, ValueAct CEO Jeffrey Ubben joined the Valeant
board as deal discussions with Allergan (N:AGN_pa) were heating up.
He remained on the board until August of this year, when he
stepped down and handed the seat to ValueAct partner Robert
Hale. According to a person familiar with the matter, Ubben
stepped down from Valeant because he had just taken on a new
role as a board member at 21st Century Fox. Hale remains a
Valeant board member.
Valeant's stock dipped to $109.54 on Tuesday. Prior to
Left's report last Wednesday, Valeant's stock was trading in the
$150 range - and as high as $263 in early August.
The direct outreach by Morfit to Valeant shareholders, on
top of the conversations that Valeant CEO Michael Pearson (L:PSON) is
already having with investors, shows how the activist hedge fund
is going into overdrive to deal with the crisis and shore up its
own investment.
ValueAct has been an investor in Valeant since 2006. Ubben
and Morfit were involved in recruiting Pearson, who became CEO
in 2008 and built the company into a more than $40 billion giant
from more than 100 transactions. ValueAct, with $19 billion
under management, now has two directors on the company's board,
and was the fourth largest shareholder as of June 30.
William Ackman's Pershing Square, Valeant's third-largest
shareholder, has scheduled a call on Friday at 9 am EDT to
address the drug company's issues. Pershing's investment in
Valeant came on the heels of the Allergan deal, which fell apart
last year. Pershing owned 5.7 percent of Valeant as of June 30,
and faced a paper loss of more than $800 million at one point
last week.
ValueAct declined to comment for this story.
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TIMELINE-Deals, and doubts, mark Valeant's acquisition history
urn:newsml:reuters.com:*:nL1N12N1PL
TAKE A LOOK-Valeant under fire urn:newsml:reuters.com:*:nL1N12N1TH
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