One thing Allergan CEO David Pyott enjoyed doing was running his company. When activist investor Bill Ackman of Pershing Square decided to have Valeant Pharmaceuticals try to swallow up the Botox maker in a hostile takeover bid, Pyott no longer had the luxury of taking care of his business, but had to spend 90% of his time fighting off Ackman and Valeant, and had to entrust the day-to-day operations of Allergan to someone else, he admitted to Fortune.
Before Ackman came along, Allergan was doing just fine … in fact, more than fine. It had diversified the “vanity” drug away from just taking care of wrinkles, and Allergan was finding multiple applications for Botox, including treating eye problems and migraines. The company’s research and development segment was crucial for creating value for the company, additional medical uses for Botox and other treatments, but a takeover by Valeant would have threatened all of that, since it wanted to cut Allergan’s research and development budget dramatically.
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David Pyott got on the defensive when Ackman, who had a huge stake in Allergan, tried to force the takeover by Valeant. Pyott accused both Valeant and Ackman of insider trading and said Valeant was “vile.” Pyott said he would do it all again.
While the story ended with Allergan being bought, it was by Actavis, not Valeant at $219 a share rather than Valeant’s offer of $152 a share. In addition, Actavis respects Allergan’s business culture and won’t cut its R&D budget. Pyott said he is often consulted by other CEOs whose companies are under attack by the likes of Ackman. Still, Ackman was “rewarded” for his efforts; although the horse he backed, Valeant, didn’t win, as a large shareholder in Allergan, he managed to drive up the price of Allergan through the takeover drama, and emerge as one of the most successful hedge fund managers of 2014.