Not since Felix and Oscar teamed up in the Odd Couple has there been a more curious collaboration.1 Pershing Square Capital Management L.P. and Valeant Pharmaceuticals International have entered into a short-term marriage of convenience to facilitate Valeant’s hostile acquisition of Allergan in a $53 billion deal. As with many relationships, onlookers have questions: “What does she see in him?” here yields to “Why does Valeant need Pershing Square?” Beyond this initial question about whether this relationship makes sense, there is also a second and more traditional legal issue: Can a strategic bidder really tip a hedge fund that it is about to make a tender offer if they use the right cosmetics? Isn’t that precisely what Rule 14e-3 was suppose to preclude? This column will examine both of these questions.
Only one question about this hook up between a strategic bidder and a hedge fund is not being asked: What does Pershing Square get from this? Here, the answer is obvious: It incurred a paper profit of $1 billion on its stake in Allergan on the announcement of Valeant’s merger proposal. Other hedge funds would undoubtedly like to receive similar proposals from other bidders, and conceivably the generally unromantic M&A scene could see of number of very lucrative one-night stands between ardent Prince Charming suitors and less-than-bashful maiden hedge funds. But adults may still wonder: How long will these relationships last?
The Bidder/Hedge Fund Pairing
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