- REUTERS/Rick Wilking
The Senate has published a bunch of documents pertaining to Valeant, and it is a gold mine of info.
We’re running through the 818-page document and will be pulling out some of the highlights.
First up, here is an email from Bill Ackman to Charlie Munger, Warren Buffett’s right-hand man, sent April 11 last year.
Ackman had earlier emailed Buffett’s assistant, Debbie Bosanek. This all came after Munger said “Valeant is like ITT and Harold Geneen come back to life; only the guy is worse this time.”
Ackman’s email making a case for Valeant is copied below. It seems his efforts were unsuccessful. Munger later said that Valeant’s pricing strategy was “deeply immoral” and that Valeant was “a sewer.”
Warren gave me your email and suggested I contact you directly concerning Valeant and Mike Pearson. I write to address the statement you recently made: “Valeant is like ITT and Harold Geneen come back to life; only the guy is worse this time.” Valeant was involved last year in a takeover battle with Allergan, an LA-based company, and there was a lot of misinformation disseminated by Allergan about Valeant. Perhaps that is the source of your misinformation.
My goal with this email is to inspire you to meet with Pearson so you can learn more about him and Valeant. I think you have the facts wrong and would benefit by spending an hour with Mike. At a minimum, it seems fair that you would give Mike an opportunity to respond to your concerns as you have criticized him publicly without having met him, and your remarks have been widely circulated.
Valeant shares a lot of similarity to Berkshire in its decentralization, its approach to capital allocation, and its shareholder orientation. Pearson’s management approach is similar to 3G’s in the company’s extremely cost-disciplined and rational approach to operations. While Valeant has made a large number of acquisitions of varying size in an extremely strategic and disciplined fashion since Pearson has been CEO, nearly all have been purchased for cash. Valeant is not a roll up which has used a high-value currency to buy lower-multiple unrelated businesses. In fact, Valeant stock has been and continues to remain perennially undervalued, and Pearson has been extremely reluctant to issue equity (in fact, the company repurchased a substantial amount of stock in the first few years of his tenure).
I would rather you not take my word, but have an opportunity to form your own opinion by meeting Pearson. Others I believe you respect think highly of Mike and Valeant. I introduced Mike to Jorge Paolo Lehmann at Jorge’s request, and shortly after the meeting, he purchased a substantial stake in Valeant. Valeant’s largest shareholder is Ruane Cunniff, who have owned Valeant for years. Valeant displaced Berkshire as Ruane’s largest investment in recent years. My firm, Pershing Square, is Valeant’s third-largest shareholder. Shareholders have earned more than a 30-fold return (including reinvestment of dividends) in the less than five years that Pearson has been CEO of the company. While short-term performance is not evidence of long-term value creation, I believe that if you were to study the facts you would conclude that Valeant has created real long-term economic value while simultaneously becoming one of the most productive (in new drug development) large pharmaceutical companies in the world.
Mike is not seeking an investment from you. Rather, he simply would like the opportunity to address the reputational damage your remarks have caused.
Please let me know if you would be willing to meet Mike. We would be delighted to come see you at the place and time of your convenience.