Shares of Herbalife Tuesday rose nearly 10 percent to close at $44.09, reversing almost all of its losses from the previous day, when the stock plunged more than 10 percent amid rumors that Herbalife booster Carl Icahn was selling his shares. However, the rumors were subsequently squelched after the market closed. Of course, William Ackman’s New York-based Pershing Square Capital Management still has a big negative bet on the stock, maintaining his stance that the multi-level marketer of nutrition supplements is a Ponzi scheme. The stock, however, traded as high as $67.77 two months ago.
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Allergan is reportedly discussing a possible acquisition of Salix Pharmaceuticals, which it had discussed as long ago as July, according to a Bloomberg report. The deal would be designed to defend against the hostile takeover offer from Valeant Pharmaceuticals International and Pershing Square Capital Management. Bloomberg says Salix turned down Allergans earlier offer because it was not adequate. Bloomberg also reports that specialty pharmaceutical company Actavis also made overtures to Allergan in August.
In response to these reports, Ackman of Pershing Square fired off a letter to Allergans board of directors warning them not to do a deal with Salix, although it did not identify the would-be merger partner by name. Noting that the deal, which he calls “a substantial highly leveraged acquisition,” would not require shareholder approval, Ackman calls this ploy “an attempt to preclude a transaction with Valeant.” However, he says this goes against earlier published statements by Allergan that it fully supports the right of shareholders to vote on the value proposition offered by Valeant at the appropriate time. Ackman warns: “If you take such action we will immediately bring litigation against you (and any counterparty that aids and abets you) for breach of fiduciary duty.”
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Several hedge fund firms are buying up government paper issued by Venezuela. The debt has been badly hit since Standard & Poor’s cut the country’s credit rating to CCC+ and warned that there is at least a 50 percent chance the debt will default in two years, BusinessWeek points out. Among the funds buying the debt, which is now yielding around 15.7 percent, include New York-based Greylock Capital Management and Washington-based Callaway Capital Management, according to the report. BusinessWeek says the yield is now the highest among developing nations.
“The real story is the degree of hype and panic out there,” Daniel Freifeld, Callaway’s co-founder, told BusinessWeek in an e-mail. “Everyone is running for the doors. Are there risks? Sure. But not to the degree people believe.” Venezuela has $4.5 billion of debt due in October, according to the report.
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Hal Lehr, a former trader with Deutsche Bank and Soros Fund Management, is launching a new global macro hedge fund firm with backing from JPMorgan Chase & Co.’s asset management unit, according to BusinessWeek, citing a person with knowledge of the matter. Lehr plans to launch his new firm, Athon Capital, in January. The firm plans to focus on commodity trading.
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Shares of Sears Holdings — the largest holding of Bay Harbor, Florida-based hedge fund firm ESL Partners and its founder Edward Lampert — rose for the first time in eight sessions, climbing 1 percent to close at $27.68. It is now down about 20 percent since just September 11.
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Fir Tree Partners announced the final close of its Real Estate Fund III with more than $750 million in committed capital. The New York firm’s real estate funds invest in debt and equity in both the private and public markets, according to its announcement. Fir Tree had about $12.3 billion in hedge funds at the beginning of the year, up from $8.7 billion the previous year.
