Valeant Planning to Raise Its Bid for Salix Pharmaceuticals
2015-03-13 17:33:28.440 GMT
By DAVID GELLES
(New York Times) -- Valeant Pharmaceuticals is planning to
team up with Pershing Square Capital Management and other top
shareholders, including ValueAct Capital, to raise its bid for
Salix Pharmaceuticals this weekend, according to people briefed
on the matter.
The raised offer will be above $160 a share and consist
entirely of cash, these people said. The exact price of Valeant’s
new offer was not yet known.
Valeant hopes that the increased offer will be enough to end
a bidding war that has erupted over Salix, a maker of
gastrointestinal drugs.
Valeant agreed to buy Salix for $158 a share in cash, or
about $10 billion, last month. But earlier this week, the drug
giant Endo International offered $11.2 billion, or $175 a share,
mostly in stock, for Salix.
The Salix board is meeting on Saturday to consider the rival
offers, these people said.
While the Endo bid is higher, it also introduces several
uncertainties to the sale process for Salix. Among the top
concerns for analysts are the need for shareholder votes, a large
stock component and the results of a pending treatment approval
by the Food and Drug Administration.
Nonetheless, the Endo offer sent Salix shares trading
substantially higher, making it difficult for Valeant to stand by
its lower bid. Details of Valeant’s new bid were still coming
together on Friday afternoon.
To finance the increased offer, Valeant is turning to top
shareholders, including Pershing Square, the hedge fund run by
William A. Ackman. Pershing Square and Valeant worked closely
together for much of last year in an attempt to acquire Allergan,
them maker of Botox.
But Allergan was eventually acquired by Actavis, earning an
enormous profit for Mr. Ackman but leaving Valeant with little to
show for its efforts.
Then earlier this month, it emerged that Pershing Square had
taken a nearly 5 percent stake in Valeant but pledged to remain a
passive investor.
Acquiring Salix would be a much-needed victory for Valeant.
Speaking on CNBC on Friday, Mr. Ackman expressed confidence
in Valeant and its chief executive, J. Michael Pearson.
“I know Mike Pearson very well,” Mr. Ackman said. “I worked
with him for a year. He’s the most disciplined buyer of
companies. He’s not going to overpay for Salix.”
Mr. Ackman also suggested Salix shareholders would be wary
of taking so much Endo stock, compared with the cash being
offered by Valeant.
“In order for them to take the Endo transaction they have to
walk away from an all-cash deal,” Ackman said. “If you think
Valeant is getting it on the cheap, then you should buy Valeant
stock, which is what we did. We think Valeant stock is very
cheap.”
Other investors, including ValueAct Capital, another
activist hedge fund that is a big Valeant shareholder, are also
said to be helping finance the raised offer for Salix. It was not
immediately clear whether the hedge funds would simply lend money
to Valeant or use another mechanism to smooth the way for Valeant
to prevail in the bidding war.
Valeant is hesitant to take on more debt from banks because
it does not want to hurt its credit rating, people briefed on the
matter said.
Salix still hasn’t commented on the Endo offer, other to say
that it had received it and was reviewing it with its advisers.
Speaking at the Barclays Global Healthcare Conference on
Thursday, Endo’s chief executive, Rajiv De Silva, said he hoped
the bidding war over Salix would not last too long.
“We have no interest in a long drawn-out process,” Mr. De
Silva said. “We hope that this will be resolved quickly. This is,
I believe, in the best interest of the shareholders of all three
parties involved.”
Copyright 2015 The New York Times Company
-0- Mar/13/2015 17:33 GMT
2015-03-13 17:33:28.440 GMT
By DAVID GELLES
(New York Times) -- Valeant Pharmaceuticals is planning to
team up with Pershing Square Capital Management and other top
shareholders, including ValueAct Capital, to raise its bid for
Salix Pharmaceuticals this weekend, according to people briefed
on the matter.
The raised offer will be above $160 a share and consist
entirely of cash, these people said. The exact price of Valeant’s
new offer was not yet known.
Valeant hopes that the increased offer will be enough to end
a bidding war that has erupted over Salix, a maker of
gastrointestinal drugs.
Valeant agreed to buy Salix for $158 a share in cash, or
about $10 billion, last month. But earlier this week, the drug
giant Endo International offered $11.2 billion, or $175 a share,
mostly in stock, for Salix.
The Salix board is meeting on Saturday to consider the rival
offers, these people said.
While the Endo bid is higher, it also introduces several
uncertainties to the sale process for Salix. Among the top
concerns for analysts are the need for shareholder votes, a large
stock component and the results of a pending treatment approval
by the Food and Drug Administration.
Nonetheless, the Endo offer sent Salix shares trading
substantially higher, making it difficult for Valeant to stand by
its lower bid. Details of Valeant’s new bid were still coming
together on Friday afternoon.
To finance the increased offer, Valeant is turning to top
shareholders, including Pershing Square, the hedge fund run by
William A. Ackman. Pershing Square and Valeant worked closely
together for much of last year in an attempt to acquire Allergan,
them maker of Botox.
But Allergan was eventually acquired by Actavis, earning an
enormous profit for Mr. Ackman but leaving Valeant with little to
show for its efforts.
Then earlier this month, it emerged that Pershing Square had
taken a nearly 5 percent stake in Valeant but pledged to remain a
passive investor.
Acquiring Salix would be a much-needed victory for Valeant.
Speaking on CNBC on Friday, Mr. Ackman expressed confidence
in Valeant and its chief executive, J. Michael Pearson.
“I know Mike Pearson very well,” Mr. Ackman said. “I worked
with him for a year. He’s the most disciplined buyer of
companies. He’s not going to overpay for Salix.”
Mr. Ackman also suggested Salix shareholders would be wary
of taking so much Endo stock, compared with the cash being
offered by Valeant.
“In order for them to take the Endo transaction they have to
walk away from an all-cash deal,” Ackman said. “If you think
Valeant is getting it on the cheap, then you should buy Valeant
stock, which is what we did. We think Valeant stock is very
cheap.”
Other investors, including ValueAct Capital, another
activist hedge fund that is a big Valeant shareholder, are also
said to be helping finance the raised offer for Salix. It was not
immediately clear whether the hedge funds would simply lend money
to Valeant or use another mechanism to smooth the way for Valeant
to prevail in the bidding war.
Valeant is hesitant to take on more debt from banks because
it does not want to hurt its credit rating, people briefed on the
matter said.
Salix still hasn’t commented on the Endo offer, other to say
that it had received it and was reviewing it with its advisers.
Speaking at the Barclays Global Healthcare Conference on
Thursday, Endo’s chief executive, Rajiv De Silva, said he hoped
the bidding war over Salix would not last too long.
“We have no interest in a long drawn-out process,” Mr. De
Silva said. “We hope that this will be resolved quickly. This is,
I believe, in the best interest of the shareholders of all three
parties involved.”
Copyright 2015 The New York Times Company
-0- Mar/13/2015 17:33 GMT