Valeant wins bidding war with $11bn price for Salix

Mar 16, 2015, 4:03 PM EDT
Michael 'Mike' Pearson, chairman and chief executive officer of Valeant Pharmaceuticals International Inc., pauses during a Bloomberg Television interview in New York, U.S., on Wednesday, April 23, 2014.
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Valeant raised its takeover price for Salix by about a billion dollars, knocking out rival Endo and securing the deal. Valeant increased its per-share payment to $173 a share, or about $11.1 billion in total, up $15 from the $158 price Salix agreed to take from the drug company in February, reports the Wall Street Journal. The higher, all-cash price prompted Endo to withdraw its rival cash-and-stock bid, valued at $172.56 a share Friday. Endo’s bid for Salix, valued at $175 a share, or about $11.2 billion, when it was made on Wednesday, had been seen as taking longer to close and facing more uncertainty as it required a vote of Endo’s shareholders. No such approval is required from Valeant shareholders. Endo said in a news release that it has a “robust deal pipeline,” indicating it may have other potential acquisitions in mind.

Though it has prevailed in the bidding war with Endo, Valeant must now come up with $11 billion in cash, and has limited options as to how it will finance such a large cash bid, notes the New York Times. A plan that was being considered as late as Friday would have seen Pershing Square Capital Management and ValueAct – two activist hedge funds that are also large Valeant shareholders – buy new shares from Valeant as a way to help the company raise money, according to people briefed on the matter. Details of how Valeant would finance the new offer were not made public. But people briefed on the company’s plans said it was unlikely that they would take on more debt from banks, concerned that doing so would damage its credit rating. 

Salix would be the largest purchase ever made by Canada-based Valeant, whose growth has long been fueled by acquisitions and cost-cutting, writes Reuters. The acquisition would offer some redemption for dealmaking Valeant Chief Executive Michael Pearson, whose hostile bid for Allergan Inc failed last year. It would also be a boost for investor Bill Ackman, who announced last week he had bought a more than $3 billion stake in Valeant after having worked with the company on the Allergan bid.

Even so, the deal would sharply raise Valeant's debt, and it is buying a company that last year was forced to slash its full-year earnings forecast after supply levels for certain drugs were higher than earlier indicated. The short bidding war for Salix pitted Valeant's Pearson against his former protege, Endo Chief Executive Rajiv De Silva, a top executive at Valeant until 2012. Valeant's new offer provides Salix stockholders with about $1 billion more in cash, Valeant said. It said the deal was expected to close on April 1.