Credit Suisse Group AG (NYSE:CS), which has built a business defending corporate clients against activist investors, has joined the side of activist William Ackman in his campaign to help Valeant Pharmaceuticals International Inc. (NYSE:VRX) take over Botox maker Allergan Inc. (NYSE:AGN).
A representative for Mr. Ackman's Pershing Square Capital Management LP said in an interview Tuesday that the firm has hired the bank for advice on the contentious deal. Canada's Valeant, with financial and other backing from Pershing Square, has made a $53 billion hostile offer for Allergan, which has rejected the offer and told its shareholders it believes it is better off independent.
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Credit Suisse's decision to work for the side of an activist investor like Mr. Ackman marks a rare move by one of Wall Street's top investment banks. Bankers at a number of top firms say privately they would not work for an activist for fear of alienating their roster of large corporate clients.
Yet, with activists becoming an increasingly influential force in corporate America--pursuing more and bigger companies--banks that don't work with them are missing out on a growing business opportunity that some smaller banks are gladly picking up.
Credit Suisse's move to align with Mr. Ackman suggests big, established banks are opening the door to working with activists. Among the bankers on the team for Pershing Square is Chris Young, the bank's head of contested situations, who had been hired by Credit Suisse to build a practice helping corporations defend against activists.
At the same time, Mr. Ackman's role in the Valeant-Allergan battle isn't typical of an activist. Such investors generally build a position in a company and then push for change, for example a sale or share buyback.
But in this situation, Mr. Ackman's Pershing Square is a "co-bidder" with Valeant in pursuit of Allergan, essentially putting Credit Suisse in the traditional Wall Street role of deal adviser. Indeed, were Valeant and Mr. Ackman to prevail, Credit Suisse would presumably be in line for credit in "league tables" that track banks' success at scoring deals business. The $53 billion offer for Allergan is currently the largest proposed deal of the year.
For Pershing Square, the hiring will give the hedge fund some added resources and the backing of a brand banking name as it attempts to pitch Allergan shareholders on the merits of the deal and Valeant's long-term story. Since the deal is for Valeant stock as well as cash, Mr. Ackman has spent hours in public presentations and private meetings attempting to convince Allergan holders of the value he sees in Valeant shares.
Credit Suisse's Mr. Young is often cited for having good relationships with shareholders given he formerly worked for influential proxy advisory firm Institutional Shareholder Services Inc. The Credit Suisse team also includes the bank's global head of mergers and acquisitions Scott Lindsay and others.
The alliance between Credit Suisse and Mr. Ackman marks the latest Wall Street convention to get turned on its head amid the hostile fight for Allergan.
From the moment Mr. Ackman and Valeant announced their partnership in April, itself highly unusual, the fight has taken several turns that have been unprecedented or at least uncommon, including an aborted shareholder referendum and a now-settled legal battle over Allergan's poison pill.
The hiring will also be the latest twist in the role of bankers on the deal. Last month, Valeant, which doesn't typically pay for Wall Street advice, hired Morgan Stanley and its head of M&A, Rob Kindler, on the prompting of an Allergan shareholder. Allergan then released emails from some Morgan Stanley bankers showing the bank tried first to get hired by Allergan.
Allergan shares were up slightly in Tuesday afternoon trading, rising 0.2% to $169.57. Valeant was down 0.5% at $125.50.