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Sequoia Managers Take Valeant Gains to $3.8 Billion on Takeover

Ruane Cunniff & Goldfarb Inc., managers of the Sequoia Fund Inc., made a paper profit of about $300 million today on shares of Valeant Pharmaceuticals International Inc., bringing its gain on the investment to approximately $3.8 billion since it first bought the stock in 2010.

Valeant climbed 7.3 percent to $135.15 at 3:26 p.m., after Canada’s largest drugmaker offered to buy Allergan Inc., maker of Botox wrinkle treatment, in a cash and stock deal valued at $45.7 billion. Bill Ackman of Pershing Square Capital Management LP, Allergan’s largest shareholder, is supporting the offer.

Ruane Cunniff owned about 34 million shares of Valeant as of Dec. 31, making it the company’s largest owner. Ruane acquired the shares in the third quarter of 2010 when the stock sold for an average of about $23 a share, according to data compiled by Bloomberg.

“We like Valeant’s approach to the pharmaceutical business,” the managers of the Sequoia fund wrote in a February letter to shareholders signed by Robert Goldfarb, David Poppe and Richard Cunniff. Cunniff died in March at the age of 91.

Buffett Recommendation

The $8.3 billion Sequoia Fund was co-founded in 1970 by Cunniff and the late William Ruane, a friend of Warren Buffett’s from the days the two studied together under legendary value investor Benjamin Graham at Columbia University. When Buffett shut down his investment partnership to concentrate on Berkshire Hathaway Inc., he recommended his clients invest with Ruane.

Sequoia Fund held 11.3 million shares of Valeant as of Dec. 31, according to the Sequoia website. Omaha-based Berkshire Hathaway was the fund’s second-largest holding. The fund outperformed 98 percent of peers over the past three years.

Over the past 25 years the fund has returned 13 percent a year compared with 10 percent for the Standard & Poor’s 500 Index.

“They have the kind of portfolio Buffett might have if he ran a mutual fund,” Steven Roge, a portfolio manager with Bohemia, New York-based R.W. Roge & Co., said in a 2012 interview with Bloomberg, speaking about Sequoia’s managers.

Ruane Cunniff did not respond to a call seeking comment.

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