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Salix Suitors May Yet Emerge to Challenge Valeant: Real M&A 2015-02-23 20:29:12.310 GMT
(For a Real M&A column news alert: {SALT REALMNA <GO>}.)
By Tara Lachapelle (Bloomberg) -- It might still be early for investors to rule out competing offers for Salix Pharmaceuticals Ltd. The drugmaker’s $14.5 billion deal with Valeant Pharmaceuticals International Inc. came together quickly, considering that Salix was essentially just put back in play after it restated financial results in late January. The maker of diarrhea medicine is now selling to Valeant for $158 a share, which falls short of what some analysts and shareholders were expecting given the long list of companies that were thought to be interested suitors, including Shire Plc and Actavis Plc. Valeant’s offer values Salix at 69 times trailing 12-month earnings before interest, taxes, depreciation and amortization, more than four times the median multiple for similar deals. Yet with Salix poised to win regulatory approval next quarter for a potentially lucrative new product, Valeant may be paying closer to 15 times Ebitda, based on analysts’ projections for next year’s profit. “It seems like Valeant worked very quickly to conclude their due diligence and decide whether to make a bid,” David Steinberg, a San Francisco-based analyst for Jefferies Group LLC, said in a phone interview. “It is lower than most would have expected. The question is, is that the high bid or will others come in?”
Reasonable Price
Credit Suisse Group AG’s Ronak Shah said a takeover price of $170-a-share or more would have been reasonable. That’s a 7.6 percent bump from what Valeant has agreed to pay. Salix shares fell 1.3 percent on Monday to $155.80 at 3:28 p.m. in New York, leaving a more than $2 arbitrage spread. The gap signals fading speculation of a counterbid. Even so, Shire, Takeda Pharmaceutical Co., AstraZeneca Plc, AbbVie Inc., Endo International Plc and Actavis are also considered logical buyers for Salix. Valeant’s speediness may be what complicated things, said Steinberg of Jefferies. Some potential counterbidders might have preferred to wait until May to see whether the U.S. Food and Drug Administration approves Salix’s Xifaxan for diarrhea caused by irritable bowel syndrome. But Valeant is planning to close its deal before that. “Hard to envision how another bidder would come in at a much higher price,” David Amsellem, a New York-based analyst for Piper Jaffray Cos., said in his note today. “The simple reality here is that we are still in front of an FDA decision.”
For Related News and Information: Valeant’s $10.1 Billion Salix Deal a Bet on FDA Decision Salix Fit for Bids as Accounting Issue Is Resolved: Real M&A Real M&A columns: NI REALMNA <GO> Top deal stories: DTOP <GO>
To contact the reporter on this story: Tara Lachapelle in New York at +1-212-617-8911 or tlachapelle@bloomberg.net To contact the editors responsible for this story: Beth Williams at +1-212-617-2307 or bewilliams@bloomberg.net Mohammed Hadi