The Morning Brief: Ackman Attacks Herbalife, Defends Valeant

Pershing Square Capital Management’s William Ackman Monday went on CNBC to defend his investment in Allergan, make the case for Valeant Pharmaceuticals’ roll-up business model and defend his role in Valeant’s bid for Allergan. He also declared that in the next phase of the Herbalife saga, “I believe the government will start arresting people.” Wow!

Ackman, who also disclosed he previously had lunch with one-time nemesis Carl Icahn, concedes that he has lost money on Herbalife. He said he shorted the stock around $45 to $50 and the stock is now around $64. Most of his current negative bet is through put options. He added: “If [Herbalife] disappeared tomorrow we’d make about $2 billion.”

Man Group agreed to acquire Pine Grove Asset Management, a fund-of-hedge-fund firm with $1 billion in assets that specializes in credit-focused hedge fund portfolios. The deal is expected to close in the third quarter. About two-thirds of Pine Grove’s assets are from institutional investors, primarily US-based, with the remaining third from wealthy individuals in the U.S. and family offices.

Barry Rosenstein’s Jana Partners sold about 1.5 million shares of Oil States International, reducing its stake to 8.6 percent. In a regulatory filing, the New York–based activist hedge fund firm said it is “highly supportive” of recent steps taken by the oilfield services company, in particular the recent spinoff of its accommodations business, Civeo Corporation, and the company’s commitment to repurchase shares “given the trading discount to intrinsic value.”

Shares of Family Dollar surged more than 13 percent on Monday, to close at $68.62, after Carl Icahn late Friday disclosed he owned 9.4 percent of the deep discount retail chain. Icahn is the second activist to own a big stake in the company. Nelson Peltz’s Trian Partners has been a shareholder for a few years and currently owns 7.35 percent of the stock. In addition, Edward Garden, chief investment officer and a founding partner of Trian, sits on Family Dollar’s board.

In response, on Monday morning Family Dollar instituted a one-year poison pill that would be trigger if an investor took a 10 percent stake in the company. The company said in a statement that it is “open to dialogue with all shareholders” regarding “the shared goal of enhancing value.” Another high profile investor with a large stake in the stock is John Paulson’s Paulson & Co. Meanwhile, shares of rival Dollar General surged more than 7 percent on speculation the two companies may merge. Major holders include Tiger Cubs Lone Pine Capital and Tiger Global Management.