Awhile back, Charlie Munger was one of many people who publicly sh!t all over Valeant.
Warren Buffett's BFF made it clear that he was of the opinion Valeant is a total disaster run by a shady character. Some names were thrown around and things were said. Things like "sewer," "immoral" and - maybe worst of all - "ITT."
But Charlie wasn't throwing shade into a vacuum, and his catty comments were heard by Valeant's head cheerleader, Bill Ackman. According to an email uncovered by the Senate's probe into Valeant - and found by BI - Ackman reached out to Munger through Buffett with a clear message of "We can hear you, b!tch."
Warren gave me your email and suggested I contact you directly concerning Valeant and Mike Pearson. I write to address the statement you recently made: "Valeant is like ITT and Harold Geneen come back to life; only the guy is worse this time." Valeant was involved last year in a takeover battle with Allergan, an LA-based company, and there was a lot of misinformation disseminated by Allergan about Valeant. Perhaps that is the source of your misinformation.
My goal with this email is to inspire you to meet with Pearson so you can learn more about him and Valeant. I think you have the facts wrong and would benefit by spending an hour with Mike. At a minimum, it seems fair that you would give Mike an opportunity to respond to your concerns as you have criticized him publicly without having met him, and your remarks have been widely circulated.
Ackman has had a rough time lately and he's clearly trying to get Munger to stop taking shots at Valeant before becoming as familiar with its troubles as Ackman himself has become. Frankly, he's annoyed with Old Man Munger.
But Bill is a businessman, so he recognizes that you get more flies with honey so he shifts from defensive to full-on Willie Loman.
Valeant shares a lot of similarity to Berkshire in its decentralization, its approach to capital allocation, and its shareholder orientation. Pearson's management approach is similar to 3G's in the company's extremely cost-disciplined and rational approach to operations. While Valeant has made a large number of acquisitions of varying size in an extremely strategic and disciplined fashion since Pearson has been CEO, nearly all have been purchased for cash. Valeant is not a roll up which has used a high-value currency to buy lower-multiple unrelated businesses. In fact, Valeant stock has been and continues to remain perennially undervalued, and Pearson has been extremely reluctant to issue equity (in fact, the company repurchased a substantial amount of stock in the first few years of his tenure)
Valeant is like Berkshire Hathaway, argues Ackman. Because sometimes, Charlie, we dislike the things that most remind us of ourselves.
I would rather you not take my word, but have an opportunity to form your own opinion by meeting Pearson. Others I believe you respect think highly of Mike and Valeant. I introduced Mike to Jorge Paolo Lehmann at Jorge's request, and shortly after the meeting, he purchased a substantial stake in Valeant. Valeant's largest shareholder is Ruane Cunniff, who have owned Valeant for years. Valeant displaced Berkshire as Ruane's largest investment in recent years. My firm, Pershing Square, is Valeant's third-largest shareholder. Shareholders have earned more than a 30-fold return (including reinvestment of dividends) in the less than five years that Pearson has been CEO of the company. While short-term performance is not evidence of long-term value creation, I believe that if you were to study the facts you would conclude that Valeant has created real long-term economic value while simultaneously becoming one of the most productive (in new drug development) large pharmaceutical companies in the world.
Y'know who likes Mike, Charlie? Jorge Paolo Lehmann, that's who! Because Valeant isn't ITT...it's got troubles all its own.
And if Charlie is going to disagree with Brazil's greatest investment mind and basic logic, Ackman wants him to do it in person.
Mike is not seeking an investment from you. Rather, he simply would like the opportunity to address the reputational damage your remarks have caused.
Please let me know if you would be willing to meet Mike. We would be delighted to come see you at the place and time of your convenience.
So you've been warned, Charlie Munger. If you want to keep calling out Valeant from the comfy confines of Omaha, Bill Ackman is more than happy to grab the company's CEO and jump on a plane so you can say it to their face...because that's where Bill Ackman's head is at these days.