ValueAct returns to Valeant board, plans to raise stake

[September 26, 2014]  By Caroline Humer and Bill Berkrot

(Reuters) - Hedge fund ValueAct Capital said on Thursday it would return to the board of directors of Valeant Pharmaceuticals International Inc, which is pursuing a hostile takeover offer for Allergan Inc, and that it planned to increase its stake in the company.

Valeant shares rose more than 3 percent.

ValueAct Chief Executive Officer Jeffrey Ubben said in a statement that once he is on the board, he would work with Valeant on its $53 billion acquisition of Allergan, a deal whose certainty he has previously questioned.

Valeant and Pershing Square Capital Management, which owns nearly 10 percent of Allergan, made a bid in April for the Botox maker. Allergan has consistently rejected the offer and questioned the company's business methods, saying it relies too much on acquisitions for growth and cuts research and development too deeply.

ValueAct, which owned 5.7 percent of Valeant as of June 30, had a seat on the company's board until May, when its representative, Mason Morfit, stepped down to devote time to the fund's largest holding, Microsoft Corp.

"They're basically saying: 'We're back on the board and looking to increase our position,'" said analyst Umer Raffat of investment research firm ISI Group. "I think both those things are going to be perceived very positively by people who have questioned Valeant's business model."

Ubben in August expressed some concerns about the hostile bid for Allergan, telling Reuters that while he still liked the it, a drawn-out battle to control the company would come at too high of a cost for Valeant if it lost other opportunities.

Other investors had also said that they wanted to see more signs that the legal battles Allergan had mounted would not delay the deal well into 2015.

Since then, Allergan and Valeant settled one of the lawsuits, although another insider trading case in federal court in California has continued. Allergan also agreed to set a Dec. 18 date for a shareholders meeting.

Pershing Square, led by activist investor William Ackman, has asked for the meeting as part of a group of investors representing 35 percent of the company's shares and is seeking to name new board members at Allergan.

Shares of Valeant, which is ValueAct's second largest-holding, were up 3.2 percent at $127.93 in afternoon New York Stock Exchange trading. Allergan dipped 0.4 percent to $175.61.

(Reporting by Caroline Humer; Editing by Meredith Mazzilli and Lisa Von Ahn)

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