10:53 am ET
Jun 16, 2014
Allergan Quotes Morgan Stanley to Attack
Morgan Stanley Client Valeant
Investment bankers: Beware
what you put in emails when you haven’t been hired.
In a release Monday, the
Allergan Inc. once again went after the
business model of its unsolicited suitor
Valeant Pharmaceuticals Inc. Allergan
has made no secret that it has concerns
about Valeant’s strategy of buying companies instead of spending on research
as detailed last week by WSJ.
Indeed, this has been the crux of Allergan’s arguments for
rejecting the $53 billion cash and stock offer,
saying its own shareholders don’t want Valeant stock.
Monday, Allergan quoted
several others voicing similar concerns, including some short sellers. But
the show stoppers are the quotes Allergan cites from
Morgan Stanley 's Robert Kindler, the
bank’s global head of M&A, and David Horn, a health-care banker.
According to Allergan’s
release, Mr. Kindler wrote in an email to Allergan executives:
“My takeaway is that AGN
is not being nearly aggressive enough in going after the VRX business model
And wrote Mr. Horn:
““Part of what Rob
[Kindler] is suggesting [to Allergan] is to allow him to use his
significant relationships with media and analysts to provide a clear
and detailed articulation of why Valeant is a house of cards and your
investors should not want to take their stock.”
The twist? Morgan Stanley
hadn’t landed a role advising Allergan, and instead was hired this month by
Valeant, as reported by CNBC last week.
Those emails are the kind
bankers send when they are looking to get hired by a client. And it’s hardly
surprising that Morgan Stanley would push to get on one of the biggest deals
of the year. Allergan likely got dozens of such pitches from other
investment bankers telling them to go after Valeant’s business model, an
argument Allergan was even making to shareholders earlier this year when
some speculation of a deal was percolating but before Valeant made its
Valeant, for its part,
says its business model is more efficient and points to its dramatic stock
growth. Tuesday morning, it will address shareholders with its fourth
presentation since this fight started to “refute misleading assertions made
by Allergan and others.”
Indeed, Morgan Stanley’s
research arm actually has a buy rating on the stock.
Bankers regularly wind up
pitching both sides in a deal, so there really isn’t much unusual about the
exchange. There can be concerns about potential conflicts of interest in
some instances. (Allergan is not raising such concerns about Morgan
For example: some large
shareholders of diamond seller Zale Corp. recently tried to raise an issue
when they saw in filings that company’s banker had pitched Zale’s eventual
Signet Jewelers Ltd.
And last week,
The New York Times covered the fact that
Goldman Sachs, which Allergan did hire, has previously helped Valeant
raise funds by selling stock.
What is highly unusual is
a company releasing emails from named bankers to executives, especially when
the company has declined to hire those bankers.
Valeant’s CEO Michael
Pearson seemed amused by Allergan’s tactic, calling it “a sign of
desperation” and defending Mr. Kindler.
“Kindler is one of the
best M&A bankers out there,” Mr. Pearson said in a statement. “While we will
have some fun with him later, he’s still very much on our team.”
Allergan did include an
asterisk on the quotes: “Permission to use quotations was neither sought nor
UPDATE: This post was
updated with a comment from Valeant CEO.