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With New Valeant Pharmaceuticals Intl Inc (VRX) Stake, Bill Ackman Maintains Large Exposure to Healthcare Sector

In a new filing with the US Securities and Exchange Commission, activist investor Bill Ackman‘s Pershing Square disclosed a significant long position in Valeant Pharmaceuticals Intl Inc (NYSE:VRX). According to the 13D filing, Pershing owns 19.47 million shares of the pharmaceutical company, which represent 5.7% of its outstanding common stock. In addition, the investor disclosed a letter agreement received from Valeant, which reveals that Pershing Square intends to have discussions with Valeant regarding its plans to acquire Salix Pharmaceuticals.

Bill Ackman, Carl C. Icahn, William A. Ackman, Pershing Square Capital Management, Icahn Capital LP,

At the current price of Valeant Pharmaceuticals Intl Inc (NYSE:VRX)’s stock, Pershing Square’s stake in the company is valued at roughly $3.83 billion, which makes it the largest position in the fund’s equity portfolio, replacing Allergan, which was the largest holding in the fund’s latest 13F filing. Mr. Ackman’s bet on Allergan provided significant returns after the company was acquired by Actavis plc (NYSE:ACT) at $219 per share in cash and stock. Under the terms of the deal, the investor was entitled to receive around 9.81 million shares of Actavis and around $3.44 billion in cash. Moreover, with acquiring a stake in Valeant Pharmaceuticals Intl Inc (NYSE:VRX), Mr. Ackman will probably keep his fund’s exposure to the healthcare sector at around 50% of Pershing Square’s equity portfolio. However, since the fund’s portfolio is concentrated and usually contains less than ten positions, its positions in the healthcare sector will remain represented by Valeant, Zoetis Inc (NYSE:ZTS), and probably Actavis plc (NYSE:ACT).

Even though, Pershing Square has just disclosed holding shares of Valeant Pharmaceuticals Intl Inc (NYSE:VRX), the investor’s connection to the company dates back at least a year, when they both made a bid to buy Botox maker Allergan. While the parties were involved in the takeover, Pershing was not allowed to purchase shares of Valeant. However, after Allergan agreed to be acquired by Actavis plc (NYSE:ACT) and the deal was completed last week, Mr. Ackman decided to go activist on the Canadian drug maker. However, while the position is activist by nature and the investor might engage in some discussions with the company, the filing also stated that Pershing Square thinks “highly of [Valeant’s] management team, strategy, and track record.”

Moreover, some previous speculation stated that Mr. Ackman might push for a merger between Valeant and Zoetis Inc (NYSE:ZTS), in which Pershing Square holds 41.82 million shares, representing 8.3% of the company. In February, Zoetis and Pershing Square entered into an agreement to appoint one of the fund’s partners, William Doyle, to the company’s board of directors.

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