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Valeant Surges Ahead With $10.96B Bid For Salix Pharma, Outpacing Endo

Valeant wins Salix bid with $10.96B offer, outbidding Endo; stock rises, strategic growth achieved.

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  • Jul 08, 2024

  • Mrudula Kulkarni

Valeant Surges Ahead With $10.96B Bid For Salix Pharma, Outpacing Endo

Valeant Pharmaceuticals International Inc has upped its bid for Salix Pharmaceuticals Inc to $10.96 billion (7.42 billion pounds) in cash, outbidding Endo International Plc, the sole other bidder for the gastrointestinal drug maker. Salix has accepted Valeant's revised offer of $173 per share in cash, an increase from Valeant's previous bid of $158 per share last month, as stated in a joint announcement by both companies.

This acquisition marks Valeant's largest to date, underscoring its strategy of growth through acquisitions and operational efficiencies. For Valeant Chief Executive Michael Pearson, whose previous bid for Allergan Inc fell through last year, this deal represents a significant opportunity for redemption. Investor Bill Ackman, who recently disclosed a more than $3 billion stake in Valeant, stands to benefit from this transaction following his involvement in the failed Allergan bid.

However, despite its advantages, Valeant's acquisition of Salix comes with significant financial implications. Salix, which faced challenges last year due to higher-than-expected drug supplies leading to a cut in earnings forecasts, became the subject of a brief bidding war. Valeant's CEO, Michael Pearson, found himself competing against his former protégé, Endo's Rajiv De Silva, formerly of Valeant.

Following Valeant's revised offer, Salix's stock rose by 2%, reaching $172.75 on the Nasdaq, boosting Valeant's U.S.-listed shares by 2.5% to $202.34. Meanwhile, Endo's shares climbed 2.7% to $89.65 after announcing its withdrawal from the bidding process, citing alternative strategic priorities including potential deals and R&D initiatives.

Endo had initially proposed a $175 per share deal for Salix, but Valeant's enhanced offer, primarily in cash, valued Salix higher. The transaction, set to close on April 1, involves Valeant's $1.45 billion share offering, supplemented by borrowed funds and existing cash reserves, without additional debt issuance according to IFR sources. Valeant estimates the deal will confer an enterprise value of approximately $15.8 billion upon Salix.

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