Ackman's Valeant ties pay off yet again with Sprout buy

Bill Ackman

Bill Ackman's relationship with Valeant has paid off big-time since the hedge fund manager first teamed up with the Canadian pharma on its hostile pursuit of Allergan ($AGN). And this time, it's an investment in Sprout Pharmaceuticals--Valeant's latest pickup--that's bringing in the bucks.

Ackman personally invested in the North Carolina company, taking part in its latest round of fundraising, The Wall Street Journal's sources say. And when Sprout's management team was weighing potential offers, Ackman gave Valeant CEO J. Michael Pearson and Valeant's exec team a "glowing reference," the paper reports.

Now, after Thursday's Valeant ($VRX) pact to buy the company for $1 billion--announced just a day after Sprout's FDA approval for female libido therapy Addyi--Ackman and other investors in that round will score a cash payout of about twice their initial investment, plus a share of profits based on milestones.

Valeant and Ackman first joined hands last year with a months-long takeover battle for Allergan--a quest that Actavis--which has since changed its name to Allergan--ultimately spoiled with a white-knight swoop-in. Ackman, whose Pershing Square Capital Management had used its nearly 10% stake in Allergan to try to force the buyout, still made a pretty penny, though, netting $2.6 billion on the deal.

Since then, Ackman has continued to sing Valeant's praises--and put his money where his mouth is, too. This March, his hedge fund nabbed a $3.3. billion stake in the drugmaker to become its fifth-largest shareholder, and he later compared the deal-focused company with an early-stage Berkshire Hathaway ($BRK).

One of Ackman's biopharma investments still hasn't played out the way some industry watchers thought it might, though. Shortly before Valeant's Allergan plans collapsed, Pershing Square picked up an 8.5% stake in animal health leader Zoetis ($ZTS)--leading some to believe the serial dealmaker would try to land Zoetis in the event of an Allergan failure. So far, Pershing Square has used that stake to grab a board seat and force cost cuts, but save a rumored June deal offer for the Pfizer ($PFE) spinoff, Valeant has been quiet on the Zoetis acquisition front.  

- read the Wall Street Journal story (sub. req.)

Special Reports: The 25 most influential people in biopharma in 2015 - Bill Ackman - Pershing Square Capital Management | Pharma's top 10 M&A deals of 2014 - Actavis/Allergan

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