Sign up for our free daily newsletter to stay in the activist investing know. You know Zoetis as the world’s largest producer of medicines for animals, but it’s also a plaything for Bill Ackman’s Pershing Square.
The hedge fund owns about 8.5% of Zoetis and some 5% in its potential buyer Valeant Pharma. Ackman has a board seat at Zoetis, received in February, and also tried previously partnering with Valeant in its bid to buy Allergen.
Valeant has been rumored to have made a preliminary offer to Zoetis for a buyout. If the issue wasn’t clear - Ackman owns a stake in a company that might buy another major position of his. A corporate governance nightmare. But Ackman is used to toeing the line.
Ackman and his Pershing Square teamed up with Valeant, the “Pharma serial acquirer” to push for a buyout of Allergan, the maker of anti-ageing treatment Botox. The fund bought almost 10% of Allergan to become its largest shareholder.
The seemingly shady alliance between the two was termed as “symbiotic activism” by Wachtell Lipton. Ackman netted around $2.6 billion on the Actavis buyout of Allergan, on what is best described as insider trading in all its complex beauty. But is it really all that bad if he used material nonpublic information? Money certainly talks, helping shine a light on the fact that legalities and ethics don’t really matter if shareholders are making money.
Now in the present case of Zoetis and Valeant, Ackman has stakes in both the buyer and the seller, where he can theoretically leverage his board seat in Zoetis to push for a deal. Or put pressure on Valeant CEO Mike Pearson to do a deal.
In something similar to the Allergan deal, Pershing will be privy to confidential market-moving information thanks to its director position at Zoetis. Granted, Zoetis has a staggered board and adopted a poison pill.
In any case, I’m not here to bash Ackman, I’m just noting that Valeant might not be the obvious buyer for Zoetis that everyone thinks it is. Zoetis could well end up going to Bayer, where it’s rejected a previous bid and the hemming and hawing of Valeant buying Zoetis could be Ackman’s way of dusting up more interest for Zoetis from a different buyer. Don't forget - free daily newsletter here.