Value Act’s Cephalon Purchase and Disclosure Issue

I took note Tuesday of a 13F filing from Value Act Holdings, an activist investing firm whose largest single holding is a roughly $1 billion position in Valeant Pharmaceuticals.

Cephalon's Research & Development Headquarters in West Chester, PA.
Cephalon's Research & Development Headquarters in West Chester, PA.

Value Act currently controls roughly 6.4 percent of Valeant and has representation on the company’s board of directors. It has been paring its ownership stake in Valeant over time.

In Value Act’s latest 13F filing it discloses a 1.9 million share stake in Cephalon. It’s a stake it did not own in the fourth quarter of last year.

Why is this interesting? Well, as our viewers (and readers) know, on March 29th, at the very end of the first quarter, Valeant made a $73 all cash bid for Cephalon, sending those shares soaring.

This is the first public disclosure of Value Act’s Cephalon position. Despite its place as a large shareholder in Valeant with board representation, Value Act did not disclose its Cephalon ownership stake in any of the filings from Valeant related to its Cephalon bid.

We do not know when the firm bought the position. It’s possible it bought all the shares right after Valeant’s bid. But even if that was the case, given that Valeant’s strategy for acquiring Cephalon relied on a proxy contest, that too might have been worth disclosing.

Value Act has done very well on its position in Cephalon, given not just the Valeant bid for Cephalon, but its subsequent agreement to sell to Teva Pharmaceutical Industries for $81.50 a share.

Value Act’s general counsel has not returned a call.

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