Did Walgreen (WAG) do the right thing in not cutting its tax bill? Would it have been better just to take advantage of the law, a law that really and truly did support the notion that Walgreen could become a real foreign company after it closes its deal to swallow drugstore giant Alliance Boots?
Did Time Warner (TWX) do the right thing deciding not to engage with Twenty-First Century Fox (FOX/FOXA) on its now withdrawn $85 a share bid?
Is Allergan (AGN) spurning its shareholders' wishes by fighting off the $180 hostile bid from Valeant Pharmaceuticals (VRX)?
All three of these stories right now could be marking what some might regard as the high water mark of this current wave of mergers, acquisitions and inversions -- a wave that has caused a huge spur to the market and one it continues to need quite badly, especially in light of the new Russian headwinds.
All three of these stories involve strong CEOs who have worked hard to create value. David Pyott, the CEO of Allergan, has worked mightily to create a research and development powerhouse, actually reaping profits from his industry-high science spending and growing faster than any other major old-line pharmaceutical.
Time Warner CEO Jeff Bewkes has done a remarkable job of creating amazing value out of an empire that was eviscerated by his predecessors. The company's true worth was just beginning to shine through when he spun off Time Inc. (TIME), the once front-and-center but now vestigial print arm of the company.
Greg Wasson has taken Walgreen from a sleepy regional to a national story to a worldwide dynamo, with the Alliance Boots deal giving it unprecedented power in the tug-of-war against the drug companies. It will be the biggest buyer of medicines in the world, which means the best discounts for its customers.
I think Wasson will do whatever is right for shareholders and while some of the more aggressive short-term-oriented hedge funds wanted Wasson to invert Walgreen, I think Wasson was genuinely concerned that his company would become the poster child for negative financial engineering. It is true that he has a much better case than the other companies that have inverted, as the targets largely used Europe as a mail drop while Alliance Boots had $29 billion in sales overseas last year, but I don't think that the possibility of as much as 40% of the combined sales of the company coming from overseas would shield this company from the wrath of a President who, like Walgreen, is from Chicago. It's just too visible. I think Wasson did the right thing.
Bewkes? I don't know. I think that the shareholders were entitled to a discussion with Fox to see how high Murdoch would go. I believe in Bewkes and his ability to create value long-term, if only because he has beaten the S&P three times over since his tenure began, but if Murdoch had been willing to pay $95, which is more than a third more than the stock was trading at before the bid, I think that merited a thorough analysis instead of a dismissal.
Allergan? I think that before Pyott revealed his more aggressive forecasts, it did seem that, no matter how reprehensible someone might find the twin predators of Bill Ackman and the research-light Valeant, it made sense to sell. Once we saw the bigger numbers, though, I am confident that Pyott will steer Allergan north of where the duo could take it. Still, though, thoughtful engagement was merited, and Allergan hasn't chosen that route.
In the end, it comes down to short-term versus long-term. Put simply, it doesn't matter what Bewkes, Pyott or Wasson ultimately did. The stocks ran up big on the inversion and bid stories. You have to exercise some responsibility yourself, as no one kept you from taking profits. You accepted the nuisance that the CEOs would reject these entreaties. Shame on you, not shame on them, if you didn't take them.
