Hedge fund snaps up 5% of Valeant amid speculation of a Zoetis deal

William Ackman

Pershing Square Capital Management recently took a 5% stake in Valeant Pharmaceuticals ($VRX) in what some Wall Street insiders say is the opening salvo in what could be an eventual merger between Valeant and animal health giant Zoetis ($ZTS).

That rumor mill has been turning for months after Valeant failed in its bid to buy Allergan ($AGN).

The stake--first reported by Reuters--makes billionaire investor William Ackman Valeant's fifth-largest shareholder. Despite the speculation, Reuters cited an unnamed source who said Ackman's hedge fund would take a "passive" approach to Valeant, and not press for a deal.

Ackman has about a $2 billion stake in Zoetis, as well as a Pershing Square partner sitting on the board. Just a month ago, Valeant agreed to acquire Salix Pharmaceuticals ($SLXP) for $14.5 billion.

In January, Valeant chief executive J. Michael Pearson attempted to quash the Zoetis rumors in an interview with the Financial Times. At the time, and while admitting he made some mistakes that let Allergan slip through his hands and into those of Actavis ($ACT) for $66 billion, he said the Zoetis talk was just that--talk.

He did tell the FT, however, that the company might consider buying an animal health company if it were focused only on therapies targeted to companion animals. While more than half of Zoetis' business is focused on food production animals, the talk continues. Still, there are plenty of pet-centered targets for Valeant, including Aratana ($PETX), Kindred Biosciences ($KIN), and several other small, privately held players.

- see the Reuters story

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