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Many investors have all but lost hope that Valeant Pharmaceuticals (VRX) can find its way out of its $30 billion debt swamp. But billionaire activist Bill Ackman, a Valeant board member, says there's an exit strategy that can even leave a hefty pile of cash on the books.
There are several ways for Valeant, which Ackman views as substantially undervalued, to extricate itself from its debt problems, he said on a Thursday teleconference with investors of his Pershing Square hedge fund.
"I don't think the world will look at this company on a sum-of-the-parts basis until it has a more conservative balance sheet," he said. "And to that end, the company has an asset-disposition program that is under way."
By selling assets deemed "non-core" to its central business model, Valeant is likely to rope in more than $8 billion of cash, Ackman said, and proceeds from selling its Salix businesses -- which control Valeant's key stomach drug, Xifaxan -- could pull in about $8.5 billion in cash and another $1.5 billion in royalties, according to recent reports by Dow Jones and The Wall Street Journal.
"Think about Valeant in a world in which it sold half or all its noncore assets, plus Salix," Ackman noted. "it could pay off all its bank debt, have significant net cash, would own a mix of businesses that would be of a disproportionately higher nature."