Newspaper article International New York Times

Surprise Rival Bid Emerges for Maker of Gastric Drugs

Newspaper article International New York Times

Surprise Rival Bid Emerges for Maker of Gastric Drugs

Article excerpt

Endo's offer of $175 a share in cash and stock, or about $11.2 billion, trumps the $158 a share all-cash deal Valeant reached with Salix last month.

Endo International, a big drug firm, has thrown a wrench into Valeant Pharmaceuticals' plans to acquire Salix Pharmaceuticals, a maker of treatments for gastrointestinal disorders.

On Wednesday, Endo sent a letter to Salix's board, offering $175 a share in cash and stock for the company in a deal that values Salix at about $11.2 billion. That price trumps Valeant's agreed-on offer of $158 a share in cash, or about $10 billion.

But Endo's offer introduces a number of uncertainties into what is currently a straightforward sale for Salix.

Endo is offering mostly stock, meaning Salix shareholders would largely be betting on the future success of Endo, instead of taking a known amount of cash.

Shareholders of both Endo and Salix would also have to approve the deal. That stands in contrast to Valeant's cash offer for Salix, in which neither company's shareholders have to approve the deal.

And Endo would have to pay a $356 million break-up fee to Valeant if it succeeded, along with about $60 million in associated fees, diluting the value of the Endo stock that Salix shareholders would receive.

Valeant said it was standing by its offer. "We are firmly committed to our all-cash agreed transaction, which delivers immediate and certain value to Salix shareholders," the company said in a statement.

Endo said it believed that its proposal was better because it "would provide Salix shareholders with a substantial premium and immediate cash value, as well as the opportunity to participate in the significant upside potential of a global leader in specialty pharmaceuticals with a highly diversified platform for future growth, through a material equity component."

And in a letter to the Salix chief executive, Thomas W. D'Alonzo, Endo makes the case that it will invest in research and development of Salix drugs. That strategy stands in contrast to Valeant, which is known for cutting costs after it acquires companies.

The bidding war continues a strong run for deal making in the health care sector. This year, global health care mergers and acquisitions total more than $92 billion, according to Dealogic, up 63 percent from the same time last year. …

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