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

(Repeats with no changes)
By Carl O'Donnell
NEW YORK, Oct 23 (Reuters) - The controversy surrounding
Valeant Pharmaceuticals (N:VRX)' VRX.N 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 (N:JPM) JPM.N , Goldman Sachs Group Inc (N:GS) GS.N and
other major investment banks.
Since 2012, only General Electric (N:GE) Co GE.N , Allergan (N:AGN_pa) Plc
AGN.N , AT&T Inc (N:T) T.N 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 (N:MS) MS.N , Deutsche Bank AG DBKGn.DE and RBC
Capital Markets RBC.TO each earned roughly $50 million,
according to the data.
The handsome fee payments have come even though Valeant has
closed a number of its largest deals without hiring a mergers
and acquisitions adviser, including its largest acquisition, the
$15.8 billion takeover of Salix Pharmaceuticals in April.
In going alone in some deals, Valeant relied on the
deal-making expertise of its top executives. Its Chief Executive
Michael Pearson (L:PSON), previously led the pharmaceutical practice at
McKinsey & Co., and Chief Financial Officer Howard Schiller, who
left the company in June, was a top investment banker at Goldman
Sachs. Valeant still paid fees for the financing of the deals.
Valeant's capital raising, mostly in the form of debt, has
been by far the most lucrative source of deal-making fees,
accounting for nearly $450 million of the total, according to
the data.
For Valeant, the legacy of those capital raises is more than
$40 billion in debt, which currently exceeds its market
capitalization of around $39 billion.
Several other drug companies that have followed similar
strategies of aggressive acquisitions, cuts in research and
development budgets and price increases, have also come under
pressure amid concerns about tougher drug pricing scrutiny.

Several Valeant peers, including Endo International Plc
ENDP.O , Mallinckrodt (N:MNK) Plc MNK.N and Horizon Pharma Plc
HZNP.O , have also seen their shares fall, potentially limiting
their ability to make acquisitions in the future.