Tag Archives: Wellington Gates Paulson Liquidated Schering Plough Shareholdings 13G 13F August 14 2009 April 17 November 13 16 2010

Wellington Gets FBI Document Request — But No Subpoena?

Back in Q2 2009, while Goldman had a “convicted buy” on Merck, Wellington suddenly cut its Schering-Plough positions in half — sending gyrations through both Schering’s and Merck’s stock prices.

I cannot help but notice that both firms are now being asked about trading in unnamed companies — in this ongoing SEC investigation. We’ll report more — as we learn more, but Bloomberg is reporting that Wellington has been asked to turn over documents. If just an informal request, it would be highly unlikely that Wellington would be a target in this matter.

In fairness, though, it is not yet clear whether it was simply an informal request, or a formal subpoena. It is clear that there was no “raid”, along the lines we saw yesterday, with fully-armed FBI agents arriving — at three hedge funds. Here’s the item:

. . . .Wellington Management Co., the Boston-based money manager that oversees $598 billion, received a request for documents from federal investigators looking into insider trading on Wall Street, according to a person familiar with the firm.

Wellington said on an internal conference call yesterday that the firm is conducting a review of records, though it said it didn’t engage in illegal trading, according to the person, who asked not to be named because the firm is private. In a call today, Wellington officials disclosed the document request, without specifying what kind of information investigators are seeking, the person said. . . .

Here were my three thoughts, on Goldman’s diametrically-opposed views at the time (as compared to Wellington’s, apparently):

(1) Goldman Sachs (Ms. Jami Rubin’s current employer) rendered the first of two financial fairness opinions (contained in the June 25, 2009 definitive proxy-solicitation materials, filed with the SEC) that Merck’s bust-up of Schering-Plough, albeit styled as a proposed reverse merger with Schering-Plough, was “fair“, from a financial point of view, to Schering-Plough. That is, Merck was not getting a steal.

(2) Morgan Stanley (Ms. Rubin’s most recent prior employer, as late as mid-2008) rendered the second financial fairness opinion (contained in the June 25, 2009 definitive proxy-solicitation materials, filed with the SEC) that Merck’s bust-up of Schering-Plough, albeit styled as a proposed reverse merger with Schering-Plough, was alsofair“, from a financial point of view, to Schering-Plough. That is, Merck is not getting a steal.

(3) Both Goldman Sachs, and Morgan Stanley were leads — on Schering-Plough’s $3.8 billion of financings — one being the 6% Mandatory Convert, and the other being a series of euro, and dollar denominated debt traunches — in August and September of 2007. The Convert was pegged at a Schering-Plough common stock price of $27.50, at closing. Schering-Plough’s common had never approached that price since December of 2007 — almost two full years, back then. Clearly, if or when Merck’s shares were to rise, and the deal go through, by definition, Schering-Plough’s shares, in exchange, would rise, proportionately, as well.

Back in Q2 2009, both of Rubin’s firms — present and past — felt Schering-Plough was getting a fair price in the deal. But she hinged her “Buy” upgrade on cost-cutting by Merck, post bust-up. Fascinating.

Then, the argument goes, when New Merck wasn’t showing large-enough cost savings from the bust-up, in the first few quarters post-transaction, Goldman gutted its rating — two full notches, in one fell swoop — to Neutral. Slick. Still, I do believe she complied with her Reg AC duties, there.

As to Wellington, though — it is reasonably likely that the firm was simply unwinding its merger arbitrage play. . . the question is, when did it put the arbitrage structure in place? We’ll know before too terribly long.

Paulson & Co. Files 13F: Holds Pfizer Steady — No Merck; Ups Mylan Holdings

By far, Paulson & Co.’s largest holdings in Q3 2010 were bank stocks (and warrants on them) — Citigroup, B of A and to a lesser extent, JP Morgan-Chase (holding well over a billion shares and warrants on financial stocks) — all as reported to the SEC on its Schedule 13F, filed overnight.

That said, among healthcare, pharma, and bioscience companies, Mylan Labs — a generics manufacturer — is now his largest holding, and Pfizer is next. Paulson hasn’t held any Merck for several quarters now. Importantly, in the device space, it continues to hold 80 million shares of Boston Scientific, the beaten-down coronary stent maker (actually his largest healthcare related holding). Here’s the core pharma rundown:

. . . .Mylan Inc. | 30,000,000 common shares | (No change). . . .

Pfizer Inc. | 22,800,000 common shares | (No change). . . .

Talecris Biotherapeutics | 10,000,000 common shares | (Doubled its holdings, from 5,000,000 in Q2). . . .

Zymogentics Inc. | 8,000,000 common shares | (New position in Q3; completed takeover play). . . .

Genzyme Corp. | 1,901,200 common shares | (New position in Q3; a takeover play). . . .

Talecris supplies recombinant (genetically-engineered), and plasma-derived blood factors and proteins (and is also an antihemophilic blood factor VIII supplier) — it competes with larger rivals like Baxter and Australia’s CSL. I’ll take a look into Zymogentics and report anything I find of interest, to the readership. This was also a Q3 2010 takeover play (like Genzyme, still unfolding), for Paulson — Bristol-Myers Squibb closed the purchase of Zymogenetics on October 12, 2010.