Looking youthful for his mid-forties, Bill Ackman doesn’t seem to need Botox. So why is he so hot on the trail for Allergan, encouraging the Botox maker to acquiesce to Valeant’s hostile takeover bid? It is clear that, given Allergan’s recent successes, why Ackman and Valeant want Allegan, but why would Allergan want Ackman and Valeant?
The company has been performing well, thank you very much, with a recent revenue rising 16%, and, despite the controversy, shares rising 56% year to date. Operating income beat Wall Street’s estimates by 7%.
Usually, activist investors take a struggling company and push it to improve, but Allergan doesn’t seem to need Ackman’s help. Allergan CEO David Pyott felt that Valeant would force the company to undertake drastic cost cutting that would compromise Allergan’s research and development budget. To fend off a takeover, and perhaps to please shareholders, Allergan has made trimmed its own fat, with $500 million in savings.
Ackman won his lawsuit to push up the meeting to discuss Allergan’s fate as an independent company from December 2014 to October. There could be a board shuffle or other decisions. But that old expression “When it ain’t broke, don’t fix it” fits very well.