As William Ackman continues to drum up support from fellow investors to pressure pharmaceuticals company Allergan to call a special shareholder meeting and sell itself to Valeant Pharmaceuticals International, one person he most likely can count on is one of his protégés.
In the second quarter, Scott Ferguson’s New York–based activist hedge fund firm, Sachem Head Capital Management, took significant stakes in both stocks. At the end of June, Allergan accounted for 8.5 percent of Sachem Head’s assets, while Valeant represented 5.4 percent of its assets. The two stocks alone accounted for nearly 14 percent of Sachem Head’s total equity assets. Sachem Head reported a U.S. stock portfolio worth $979 million at the end of June 2014.
Ferguson — the first analyst at Ackman’s New York–based Pershing Square Capital Management, who eventually became a partner before leaving in 2012 after nine years with the activist firm — would not comment for the story, nor would he confirm whether he is among the one third of Allergan’s shareholders who Ackman asserts have officially called on the company to convene a special meeting. In late August, Allergan scheduled a special meeting for December 18.
Sachem Head’s sizable stakes in the two drug giants seems to contradict its typical strategy. Those familiar with the firm and its plans have said the firm’s flagship fund would typically hold eight to 16 mostly small-cap stocks. Valeant, however, has a market capitalization of more than $40 billion, while Allergan’s market cap is $50 billion.
In any case, Sachem Head is off to a strong start. In the second quarter it posted a 4.6 percent gain, putting it up 10.4 percent in the first half of the year. The firm began accepting outside investment in July 2013.
Sachem Head fared especially well with its positions in the energy industry, according to an investor in the fund. It is also said to have benefited from a cable merger. Presumably, the reference is to its positions in both Comcast and Time Warner Cable, which have agreed to merge.
The fund’s August results could not be obtained by deadline. However, in the most recent two-month period, Valeant fell by 7 percent, while Allergan slid about 3.5 percent.
On the other hand, Sachem Head’s largest holding, Zoetis, an animal health company that accounted for 14.5 percent of assets at the end of the second quarter, surged over the past two months. On August 15, Sachem Head disclosed for the first time that it had a small stake in Zoetis at the end of the first quarter.
