After the market closed on Friday, Valeant Pharmaceuticals (NYSE:VRX) revealed that just 12.5 million Allergan (NYSE:AGN) shares had been tendered. I had suspected the number would be low because they had not provided a running count (or Ackman his "entertaining" running commentary) for the tender offer. But this was far below even my expectations. In my opinion, the tender offer was intended to showcase shareholder support for Valeant's takeover. Instead it has turned into a fiasco.
The tender offer was opened on June 18th - two months ago. This was the day after Valeant's conference calls with analysts to shore up its stock. I covered the June 17th call in a previous article. The article quotes the many aggressive assurances by Michael Pearson, Valeant's CEO, that there was Allergan shareholder support for Valeant's offer. I had said:
If the deal doesn't happen as I expect it won't, there will be a lot of disappointed Valeant investors because of these numerous assurances from Valeant management.
Getting from 25% to 50% of the votes is much harder. To get to 25%, Valeant needs 1 out of 6 votes (10% from their shell company "PS Fund 1" means that we need 15% from the remaining 90%). But to get to 50% to vote out the board, they would need to get 1 out of 3 of the remaining votes (25% of the remaining 75%).
Thursday's 13-F filings were not encouraging for Valeant. Note that the buys in the 13-F purchases happened in Q2 - well before the "Arbageddon" selloff. So the Q2 portfolios would overstate the amounts held by "event-driven" hedge funds. Despite this, adding up the share counts for the five new hedge funds in the Reuters article comes to just 1.1% of Allergan shares. This article says there were 13 new hedge fund holders of Allergan - but the article also says the total number of Allergan shares held by hedge funds fell by 19%.
Except for Paulson's 2% stake, nothing of any significance has turned up. Note that Paulson has said he would be content even if Allergan makes an acquisition and stays independent.
Ackman's and Valeant's pitches about Valeant's business model have failed despite using many hundreds of slides in their presentations.
Why does Valeant continue to hang on? Maybe they are hoping to settle the lawsuit whose hearing is scheduled for August 20. I hope Allergan doesn't settle - it would deprive us of much entertainment.
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