Pershing Square Sells Stake in Valeant (VRX), Potentially Losing Over $5 Billion

Pershing Square Capital Management, L.P. announced today that it has sold its investment in Valeant Pharmaceuticals International, Inc. (NYSE: VRX). Pershing Square CEO Bill Ackman and Vice Chairman Steve Fraidin will remain on the Valeant board until the upcoming annual meeting but will not stand for re-election.

It is unclear exactly how much Pershing Square lost on the investment, but it is thought to be in the multi-billions. The firm last owned 27,234,432 Valeant shares, which were sold at about $11. The firm first disclosed its stake in March 2015, when the stock was around $200 per share and had owned as much as many as 34,118,551 shares and derivatives. The share value of the remaining 27,234,432 shares the firm just liquidated went from approx. $5.45 billion to less $300 billion, for a loss of over $5 billion.

At its current market value, Pershing Square said the Valeant position represented 1.5% to 3% of the various Pershing Square funds; however, the investment required a disproportionately large amount of time and resources. As a result, the firm elected to sell the investment and realize a large tax loss which will enable them to dedicate more time to their other portfolio companies and new investment opportunities.

After Bill Ackman and Steve Fraidin joined the Valeant board in March 2016, they worked with their fellow directors to take important steps to stabilize Valeant and position it for the future. Those steps included:

• Replacing senior management with talented executives, including CEO Joe Papa, CFO Paul Herendeen and GC Christina Ackermann;
• Refreshing the board of directors with 10 new members;
• Returning the company to a current and timely filing schedule with the SEC;
• Receiving appropriate amendments and waivers under applicable credit agreements;
• Announcing a strategy to sell non-core assets to improve the company’s balance sheet;
• Paying down ~$2.7 billion of net debt with the sale of non-core assets and free cash flow generation; and
• Last week, priced a $3.25 billion bond refinancing and covenant waiver package which extends maturities and reduces the company’s exposure to floating interest rates.

Pershing Square said CEO Joe Papa and his team have done an excellent job refocusing and setting a new course for the company. They wish the company and its extremely hard working, dedicated and loyal employees great success in the future.

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