By David Benoit
Credit Suisse Group AG, which has built a business defending
corporate clients against activist investors, has joined the side
of activist William Ackman in his campaign to help Valeant
Pharmaceuticals International Inc. take over Botox maker Allergan
Inc.
A representative for Mr. Ackman's Pershing Square Capital
Management LP said in an interview Tuesday that the firm has hired
the bank for advice on the contentious deal. Canada's Valeant, with
financial and other backing from Pershing Square, has made a $53
billion hostile offer for Allergan, which has rejected the offer
and told its shareholders it believes it is better off
independent.
Credit Suisse's decision to work for the side of an activist
investor like Mr. Ackman marks a rare move by one of Wall Street's
top investment banks. Bankers at a number of top firms say
privately they would not work for an activist for fear of
alienating their roster of large corporate clients.
Yet, with activists becoming an increasingly influential force
in corporate America--pursuing more and bigger companies--banks
that don't work with them are missing out on a growing business
opportunity that some smaller banks are gladly picking up.
Credit Suisse's move to align with Mr. Ackman suggests big,
established banks are opening the door to working with activists.
Among the bankers on the team for Pershing Square is Chris Young,
the bank's head of contested situations, who had been hired by
Credit Suisse to build a practice helping corporations defend
against activists.
At the same time, Mr. Ackman's role in the Valeant-Allergan
battle isn't typical of an activist. Such investors generally build
a position in a company and then push for change, for example a
sale or share buyback.
But in this situation, Mr. Ackman's Pershing Square is a
"co-bidder" with Valeant in pursuit of Allergan, essentially
putting Credit Suisse in the traditional Wall Street role of deal
adviser. Indeed, were Valeant and Mr. Ackman to prevail, Credit
Suisse would presumably be in line for credit in "league tables"
that track banks' success at scoring deals business. The $53
billion offer for Allergan is currently the largest proposed deal
of the year.
For Pershing Square, the hiring will give the hedge fund some
added resources and the backing of a brand banking name as it
attempts to pitch Allergan shareholders on the merits of the deal
and Valeant's long-term story. Since the deal is for Valeant stock
as well as cash, Mr. Ackman has spent hours in public presentations
and private meetings attempting to convince Allergan holders of the
value he sees in Valeant shares.
Credit Suisse's Mr. Young is often cited for having good
relationships with shareholders given he formerly worked for
influential proxy advisory firm Institutional Shareholder Services
Inc. The Credit Suisse team also includes the bank's global head of
mergers and acquisitions Scott Lindsay and others.
The alliance between Credit Suisse and Mr. Ackman marks the
latest Wall Street convention to get turned on its head amid the
hostile fight for Allergan.
From the moment Mr. Ackman and Valeant announced their
partnership in April, itself highly unusual, the fight has taken
several turns that have been unprecedented or at least uncommon,
including an aborted shareholder referendum and a now-settled legal
battle over Allergan's poison pill.
The hiring will also be the latest twist in the role of bankers
on the deal. Last month, Valeant, which doesn't typically pay for
Wall Street advice, hired Morgan Stanley and its head of M&A,
Rob Kindler, on the prompting of an Allergan shareholder. Allergan
then released emails from some Morgan Stanley bankers showing the
bank tried first to get hired by Allergan.
Allergan shares were up slightly in Tuesday afternoon trading,
rising 0.2% to $169.57. Valeant was down 0.5% at $125.50.
Write to David Benoit at david.benoit@wsj.com
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