Valeant's looming M&A hiatus deals blow to investment banks

Fri Oct 23, 2015 1:00am EDT
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By Carl O'Donnell

NEW YORK Oct 23 (Reuters) - The controversy surrounding Valeant Pharmaceuticals' strategy and its market slide this week are bad news for Wall Street investment banks that stand to lose one of their best clients.

The specialty drug company has emerged as the fifth largest payer of investment banker fees over the past three years thanks to its rapid acquisition-driven and debt-financed expansion that has made it a darling of investors.

But its business model, which has also relied on aggressive price hikes for acquired drugs, has come under growing scrutiny because of political backlash against high drug prices, dragging Valeant shares down from record highs scaled in August.

The company said earlier this week it would now focus on buying back shares and paying off debt after spending about $40 billion on some 150 acquisitions since 2008 only to see its shares plummet further after a short-selling firm raised questions about its strategy and accounting practices.

The firm's woes mean a likely loss of lucrative business for JPMorgan Chase & Co, Goldman Sachs Group Inc and other major investment banks.

Since 2012, only General Electric Co, Allergan Plc , AT&T Inc and Dell Inc have paid more than Valeant in fees to Wall Street, according to data from Freeman and Co, a consulting firm.

Valeant's investment banking fees totaled $500 million since 2012, according to Freeman. JPMorgan and Goldman Sachs have been top beneficiaries, pocketing $97 million and $84 million respectively in the last three years.

Morgan Stanley, Deutsche Bank AG and RBC Capital Markets each earned roughly $50 million, according to the data.   Continued...