By David Benoit
The mudslinging between Allergan Inc. and Valeant
Pharmaceuticals International Inc. got more intense on Monday. But
it was Morgan Stanley bankers who found themselves caught in the
crossfire.
Allergan, which is fending off a $53 billion takeover bid by
Valeant, released emails sent by senior Morgan Stanley bankers
appearing to denigrate Valeant and its business strategy.
In one email written by David Horn, a Morgan Stanley health-care
banker, to Allergan finance chief Jeff Edwards on May 18, the
bankers would help persuade shareholders and the media that
"Valeant is a house of cards," according to an Allergan
statement.
Trouble is, Morgan Stanley is now working for Valeant, the
Canada-based drug maker.
The awkward position is an unusual one, mainly because most
companies don't publicize such private communications. But the
dispute between Allergan and Valeant has become so heated that
Allergan is using all the tools at its disposal.
And while Wall Street is no stranger to using tough tactics to
win a deal, senior investment bankers were struck by the public
disclosure of Mr. Horn, and his boss, Robert Kindler, the bank's
head of mergers and acquisitions.
The combination of Valeant and Allergan would be among the
year's biggest deals and could yield a windfall of fees in the
hundreds of millions of dollars for advisers, not to mention a big
boost in the mergers-and-acquisition rankings known as league
tables, a closely watched score card among investment bankers.
"This is just another example of bankers looking to do their
thing, which is to make a deal happen, and whatever side they are
on it doesn't matter," said Brian Quinn, a professor of mergers and
acquisitions at Boston College Law School. "What you are seeing
from these emails is the sausage being made."
Allergan, the Irvine, Calif., maker of the Botox antiwrinkle
treatment, released the contents of the emails as part of a larger
package of documents it used to show why shareholders should reject
Valeant's offer.
In one email, Mr. Kindler addressed issues that some Valeant
skeptics have raised about the sustainability of the company's
business model and its stock, which the drug company aims to use as
currency in the proposed deal.
"My takeaway is that [Allergan] is not being nearly aggressive
enough in going after the [Valeant] business model and currency,"
wrote Mr. Kindler, a well-known figure in the world of deal
advisers.
A footnote at the bottom of the Allergan statement reads:
"Permission to use quotations was neither sought nor obtained."
A Morgan Stanley spokeswoman declined to comment.
Some rival bankers said privately Morgan Stanley only did what
most banks would do to get involved in such an important deal.
Allergan is being advised by Goldman Sachs Group Inc. and Bank of
America Corp.
Morgan Stanley also isn't the only bank at one point or another
to play both sides of the deal. Goldman Sachs has worked with
Valeant on prior occasions, according to S&P Capital IQ, both
for M&A and on the sale of its equity, the same stock Goldman's
client, Allergan, now publicly questions.
Valeant publicly stood by its man Monday, with Chief Executive
Officer Michael Pearson in a statement calling Mr. Kindler one of
the "best M&A bankers" and chiding Allergan for a "sign of
desperation."
Mr. Pearson added: "While we will have some fun with him later,
he's still very much on our team."
Write to David Benoit at david.benoit@wsj.com
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