Michael Pearson, the CEO of Valeant Pharmaceuticals, had never heard of the company before he was asked to look over its troubled business. Pearson was at the time a powerhouse consultant for McKinsey & Co. He saw so much opportunity at Valeant that he decided to run the place. It's not a decision that just anyone can make--but Valeant is run by financial wizards like Mason Morfit at ValueAct Capital (a large Valeant shareholder) and the wizards recognized the wisdom of Pearson, who saw how the company could change strategy. Pearson exchanged R&D for M&A--a real private equity kind of move. Valeant shares are up 800% since Pearson started his buying spree just over six short years ago.
Now Pearson is looking to buy again, and no one's happier about it than William Ackman--who managed to pay Pearson both his number one and number two compliments at a dual presser on Tuesday. Ackman's number one compliment is to call Pearson a billionaire, which on paper he is. Number two in the hierarchy of William Ackman compliments is to note that Pearson has earned his riches by increasing shareholder value, a phrase that is allegedly printed on Ackman's pajamas. Pearson's compensation--and therefore his billion(s)--is totally tied to the stock price of Valeant. That's what Ackman, who owns a tidy percentage of Allergan, wants his Allergan brethren to know: if they allow themselves to be purchased by Valeant, their interests will be in line with the CEO's interests. The price is $46 billion. Expect everyone to keep a straight face during negotiations: Allergan's chief moneymaker is Botox.
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