The real winners

Discussion in 'Valeant Pharmaceuticals' started by Anonymous, Nov 17, 2014 at 4:11 PM.

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  1. Anonymous

    Anonymous Guest

    The Hedge funds are the real winners in Allergan deal
     

  2. Anonymous

    Anonymous Guest

    According to Forbes:
    This has been a very difficult and humbling year for most hedge fund managers. But billionaire William Ackman is doing great, distinguishing himself as the hedge fund manager of 2014 by trouncing just about all big shot money managers and the U.S. stock market with a series of bold and closely-watched bets that have performed very well.
     
  3. Anonymous

    Anonymous Guest

    Pearson can take comfort in that.
     
  4. Anonymous

    Anonymous Guest

    some are saying Ackman "played" Valeant but I don't think so. this was always a potential outcome
     
  5. Anonymous

    Anonymous Guest

    My take is that hostile take over bids aren't worth it. Actavis played it perfectly. At least we won't have to integrate those AGN a-holes into VRX.
     
  6. Anonymous

    Anonymous Guest

    You did also score a big payday (as did Ackman)...
     
  7. Anonymous

    Anonymous Guest

    Yeah. The last thing we need are more a-holes.
     
  8. Anonymous

    Anonymous Guest


    Next year Valeant will just buy Actavis. Count on it. They've done this before
     
  9. Anonymous

    Anonymous Guest

    Ha thanks Mikey but it ain't gona happen. Go do a decent days
    Work
     
  10. Anonymous

    Anonymous Guest

    You can bet Mike has a list of acquisitions he's ready to make.
     
  11. Anonymous

    Anonymous Guest

    Yea but he's missed the big cash rich one that woulda cleared lots of our debt. Not to mention spent 9 months & $$$$$ millions trying to get it, we'll pay by more cuts all round
     
  12. Anonymous

    Anonymous Guest

    A company with 60% debt like Valeant may need to buy bigger and bigger companies to cover its debt cost, but once it misses a target and waste 9 months like it did with Allergan, the question becomes can Valeant ever get out in front of its debt-load again, or will its shotty accounting be exposed and the funds to buy newer bigger deals dry up as a result? Enron and Tyco did the same thing until they ran out forward momentum.
     
  13. Anonymous

    Anonymous Guest

    Exactly! The level of debt cannot be sustained, Sinking ship
     
  14. Anonymous

    Anonymous Guest

    Every company uses both debt and equity
     
  15. Anonymous

    Anonymous Guest

  16. Anonymous

    Anonymous Guest

    No, not every company but I agree most do. Johnson & Johnson has $15.2 billion in debt, but it also has $33 billion in cash and short term investments. Most analysts look at net debt, which in the case of JNJ is a net zero. A lot of large pharmas have minimal net debt positions but Valeant has more than $16.2 billion of debt and cash of $800 million.

    What is important is the percentage of the total capital structure represented by debt, because that debt has to be serviced regardless of operating results. Every company hits road bumps sooner or later and the higher the debt to capital ratio, and the lower the tangible assets to total assets ratio, the more at risk the company is from even small bumps.

    Large bumps bring the end of the company. The interest nut for the most recent four quarters averaged $252 million while cash flow from operations averaged $439 million, or an interest coverage ratio of 1.75, healthy would be north of 2.5.

    Remember, no company ever went bankrupt because it had too much equity.
     
  17. Anonymous

    Anonymous Guest

    • Many successful capital allocators emphasize cash flow rather than reported earnings because reported earnings can understate a business's true earnings power, so VRX reports "adjusted earnings" to bridge the gap between the two. But VRX also reports "adjusted cash flow," which is a travesty of the logic behind adjusted earnings.

    • VRX paid a mid-teens EBITDA multiple for Bausch & Lomb. It got into bidding wars for two of its smaller acquisitions. It got into a bidding war with itself for Allergan. This isn't the behavior of a great capital allocator.

    • VRX's adjusted earnings exclude amortization of finite-life intangibles. This kind of amortization isn't a cash cost, but it's a very real economic cost, so VRX's "adjusted earnings" distort economic reality. There's a big difference between e.g. Capital Cities amortizing a broadcasting license and VRX amortizing a drug it's acquired that will go off patent in two years.