For the past several weeks, the Wall Street rumor mill has been buzzing with speculation that Valeant ($VRX) might rebound from its failed bid to buy Allergan ($AGN) by acquiring animal health giant Zoetis ($ZTS). This seemed logical, since activist investor Bill Ackman of Pershing Square--the man behind Valeant's attempt to acquire Allergan--snapped up $1.5 billion worth of Zoetis shares in November and has reportedly been griping about the company's high cost structure.
|Valeant CEO J. Michael Pearson|
Now, CEO J. Michael Pearson is weighing in on the matter, telling the Financial Times that all the merger speculation is nothing more than that. Pearson admits that he made some mistakes that allowed Actavis ($ACT) to swoop in and grab Allergan for $66 billion, but he's not planning to rebound by buying Zoetis just because it's another Ackman project.
"I think it's highly unlikely anything is going to happen with Zoetis," Pearson told the FT. He added that Valeant has had no contact with the animal health company.
Pearson did say, however, that Valeant would consider acquiring an animal health company--provided it were focused only on developing therapies for companion animals. That would knock Zoetis out of the running, since more than half of its business comes from selling products to treat livestock. That said, there are plenty of pet-centered animal health companies out there for Valeant to choose from, including Aratana ($PETX), Kindred Biosciences ($KIN), and a host of smaller, privately held players.
As for Zoetis, it still has to contend with Ackman, who has built quite a reputation for harassing companies into M&A transactions. In November, Zoetis adopted a poison pill to try to deflect any hostile takeover attempt Ackman might try to orchestrate, and a few days later top executives held the company's first Investor Day, during which they talked up Zoetis' strengths as a standalone company.
The proselytizing continued at the recent JP Morgan Healthcare conference, where Zoetis Chief Financial Officer Paul Herendeen told analysts the company was working hard to bring down its operating expenses, an effort that includes streamlining its technology platforms. He also said Zoetis would be open to making acquisitions of its own to fill holes in its product pipeline, and that it "would lever up, potentially aggressively" to finance a deal if a good opportunity were to emerge.
- here's the FT story (reg. req.)