Saying No to a Bully

William Ackman, who is collaborating with Valeant Pharmaceuticals in the latter’s attempted takeover of Allergan, is often referred to in the press as an “activist investor.” We think of him somewhat differently, particularly in the light of his latest maneuver. Today it was reported that he sent Allergan’s BOD a letter complaining that Allergan’s CEO, David Pyott, is essentially unwilling–and unable–to negotiate with Valeant because he has a “disabling” conflict of interest: That a takeover would mean that he loses his job. That is usually the case in a takeover scenario, and this is the first time that this has (s0 far as we know) been cited as disqualifying the CEO of the smaller company. Ackman further complained that he wasn’t getting access to Allergan’s BOD one-on-one, without Pyott’s participation. It has become clear to us that Ackman is a bully, used to getting his way, and he is taking a  tantrum because his opponent is actually practicing corporate leadership.

Ackman’s commentary regarding Pyott’s “disabling conflict” is ludicrous, and telling. There are no objective parties here. Everyone has an agenda in this negotiation, Ackman after all is one of the buyers, his is not a dispassionate, objective position of authority. And  by our calculation, Pyott’s Allergan equity stake is worth about $40 million at present,  so desperately holding on to the company in order simply to hold on to his job is unlikely to be a prime motivating factor. Painting Pyott as a creature driven strictly by self-interest is an ironic stance for Ackman, whose entire raison d’etre in this context is one of self-interest. We are happy to see some grownups standing up to this oversized bully.

In the parallel takeover drama of the day, we should note that Pfizer’s Ian Read has eschewed the bully role and its tactics, even as Astra Zeneca  rebuffed his latest (and allegedly final) offer for AZ. There have been comments in the press regarding his apparent unwillingness to go full throttle into hostile-takeover mode, as if it reflects a testosterone test failed, forceful determination gone limp. Maybe it is just Pfizer’s reluctance to put its tax-advantaged aspirations at risk, but we would like to think that Pfizer recognizes something that Valeant and Ackman do not: Productive relationships do not start at gunpoint.

 

 

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One Response to Saying No to a Bully

  1. PorkPieHat says:

    No, this is not at all a testosterone test failed, but a very calculated move on Pfizer’s part. They put in a bigger bid and told the shareholders and board to take it or leave it. For now, the board decided against it, but given AZ’s history, its likely that some shareholders will get nervous and wonder if the premium being offered isn’t actually attractive after all. Now Pfizer will sit back, watch AZ fall over 10%, and come back at them with a lower bid. Matt Herper at Forbes has already called this one – this is a passive-aggressive takeover: http://www.forbes.com/sites/matthewherper/2014/05/19/pfizer-goes-passive-aggressive-in-its-bid-for-astrazeneca/

    This stalemate is not going to be the way this story ends… It’s likely that Pfizer is banking on AstraZeneca’s big shareholders putting pressure on the company before the May 26th deadline (mandated by UK law). Alternatively, they could just as well wait and then dance this dance again by making another bid in the near future, especially if AZ’s turnaround plans over the next few months its any snags. Another reason this is likely not the end of the story is that Pfizer still has to do something about its tax situation. So if it’s not going to be the AZ acquisition, who will it be? They certainly wont just twiddle their thumbs. They’ll be back, either for AZ or for some other nervous company. Sigh, its sad to see your industry imploding before your own eyes.

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