NEW YORK (TheStreet) - Bill Ackman's confidence doesn't appear shaken by a failed turnaround of retailer J.C. Penney (JCP) and an extremely complex billion dollar bet against multi-level supplements seller Herbalife (HLF).
Ackman, head of Pershing Square Capital Management, is again making another unconventional roll of the dice in investing $4.6 billion in Allergan (AGN) and pressing for a merger of the company with Valeant Pharmaceuticals (VRX).
Within the context of recent moves such as J.C. Penney, Ackman's decision on Friday to give $600 million to Allergan shareholders in a revised Valeant merger proposal and take only stock in the deal looks like a smart move. It has allowed Valeant to effectively improve upon its takeover offer and might be enough to bring all parties to the negotiating table. It also could add a new element of credibility to Ackman and Valeant's play for Allergan.
Whether Valeant succeeds in buying Allergan or not may ultimately rest on investors' confidence in the acquirer's business model and the financial benefits Ackman believes will result from the combination. Allergan, in resisting a takeover, has questioned the health of Valeant's business, arguing it lacks organic growth and has an unsustainable appetite for acquisitions.
Some investors and analysts think Allergan has a point. That's not to say Valeant doesn't have highly credible supporters to go with Ackman. ValueAct Capital Management, one of the savviest hedge fund investors, is one of the architects of Valeant in its current form. The fund has also been an active wallflower in the turnarounds of Adobe (ADBE) and Microsoft (MSFT), among other companies.