NEW YORK (Real Money) -- One of my rules of roll-ups is that only so many companies can be rolled up. And when the rolling up stops, the resetting begins -- and all roll-ups eventually reset. When they do, as I noted in my original Valeant Pharmaceuticals (VRX) column in February, the reality sets in: Either the company can grow on its own, or it can't.
Although Valeant hasn't issued any public statement on its plans to change its growth-by-acquisitions strategy, the company appears to have confirmed it in a Reuters story.
The change in strategy follows Valeant's botched bid for Allergan (AGN) . In a Reuters story, a Valeant spokeswoman said that the pullback in doing deals, with perhaps a few exceptions, will last for several quarters, and that Valeant will instead focus on paying down some of its $16 billion in junk-rated debt and doing stock buybacks. The spokeswoman added, "The silver lining that has come out of the Allergan situation is that we have already reported one relatively clean quarter.... By delivering several more clean quarters over the next several months, we will clearly show the strength of our base business."
By clean quarter, Reuters said, the spokeswoman meant no one-time acquisition costs.
That may be the case, and my hunch is that Valeant is picking this period to do that, and even leak the story, because it knows that the next few quarters will show enough organic growth to prove the critics wrong. If it does, the forensic accountants will likely have a field day trying to pick apart the numbers and show otherwise.