NEW YORK, June 19 — Billionaire hedge fund manager John Paulson joined the board of Valeant Pharmaceuticals International Inc, a move that could help comfort investors who saw long-time backer Bill Ackman bail out earlier this year.
Following Ackman’s exit in March, Paulson’s firm became Valeant’s biggest shareholder — with a stake of 5.7 per cent at the end of that month, based on data compiled by Bloomberg. The stock jumped 4.7 per cent to US$13.26 at 10.04am in New York today.
Paulson is taking the new role after the stock bounced back from recent lows in the past months, as Chief Executive Officer Joseph Papa, who joined last year, raised the company’s outlook and sold a few assets to chip away at the debt. The shares are still down more than 80 per cent from their 2015 peak, after Valeant became embroiled in accounting and drug pricing scandals. Ackman, who’d been an active board member and fervent champion even during the rocky times, said the investment was a “ huge mistake.”
Paulson shot to fame betting on the collapse of the US housing market in 2007. A decade later, the hedge-fund manager is struggling to persuade investors to stick with him after a string of missteps on everything from gold to drug stocks. The firm’s primary merger arbitrage strategy fell 25 per cent last year as drug stocks including Valeant, Allergan Plc and Teva Pharmaceutical Industries Ltd plunged.
Paulson’s firm has about US$10 billion in assets, just US$2 billion of which is outside capital, according to its most recent regulatory filing. Most of the remaining US$8 billion is Paulson’s own fortune. Paulson founded it in 1994. At its peak in 2011, the firm oversaw US$38 billion.
Sign of frustration?
Paulson became Valeant director on June 14, bringing the number of members to 11, Valeant said today in a statement. Even after Ackman’s departure, Paulson won’t be the only big investor on the board. Robert Hale, a partner with hedge fund ValueAct, has been a director since August 2015. ValueAct boosted its stake to more than 5 per cent recently, and remains among the biggest holders after first investing in mid-2006 in what was then a small experimental-drug developer.
David Maris, an analyst at Wells Fargo and a long-time critic of Valeant, viewed the new appointment with scepticism.
“It could be a sign that a major holder is frustrated with the pace and direction of change,” Maris, who rates the shares underperform, said in a note to investors. “We do not know what new domain experience that Paulson brings to Valeant’s board that was not already present, especially with ValueAct already on the board.”
Paulson is joining Valeant while winding down his role as a director at American International Group Inc. Paulson was elected last year to the insurer’s board after proposing that then-Chief Executive Officer Peter Hancock split the company into three separate businesses. Paulson’s fund sold AIG shares while he was on the board, and AIG has since replaced Hancock with Brian Duperreault. AIG said in April that Paulson wouldn’t stand for re-election “due to his other time commitments.”
“With his significant business and financial expertise, John will be a strong addition to the board,” Valeant CEO Papa said in the statement today. “His experience will be especially valuable as we continue to execute on our transformational strategy to turnaround Valeant.” — Bloomberg