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Source: The Wall Street Journal MoneyBeat, June 16, 2014 article



10:53 am ET
Jun 16, 2014


Allergan Quotes Morgan Stanley to Attack Morgan Stanley Client Valeant


By David Benoit


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 and development, 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 currency.”

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 offer public.

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 Stanley.)

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 acquirer 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 obtained.”

UPDATE: This post was updated with a comment from Valeant CEO.


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