February 4, 2015
By Mark Terry, BioSpace.com Breaking News Staff
Canada-based Valeant Pharmaceuticals International, Inc. was rumored yesterday to be considering a bid for Raleigh, N.C.-based Salix Pharmaceuticals, Ltd. .
Valeant, based in Laval, Quebec, announced Jan. 29, 2015 that it will be a stalking horse bidder for assets of Seattle-based Dendreon Corporation , making the floor bid of $296 million. Dendreon announced bankruptcy on Nov. 10, 2014.
Both of these recent deals and rumors defy earlier speculation that Valeant was going to drop its growth-by-acquisitions strategy reported in December 2014. Since 2008, Valeant has acquired more than 100 smaller companies.
In 2014 Valeant hit the spotlight because of a takeover bid for Botox maker Allergan Inc. with New York hedge fund Pershing Square Capital Management. Allergan fended off the bid, but the process was acrimonious and involved a U.S. Securities and Exchange Commission (SEC) investigation into allegations of insider trading.
Salix announced Jan. 28, 2015 that it was revising its financial statements for 2013 and the first three quarters of 2014 because of inaccuracies. It was just the most recent of a series of problems and internal issues. In November 2014 Salix was on the cusp of being bought by Allergan when due diligence revealed significant inventory problems. Shortly afterwards the company’s chief financial officer, Adam Derbyshire, resigned.
On Jan. 21, 2015, Salix announced it had hired investment bank Centerview Partners Holdings to explore its sale options. In addition, the company’s chief executive, Carolyn Logan, was retiring at the end of January, to be replaced by Tom D’Alonzo, chairman of the company’s Board of Directors.
Although representatives of Valeant and Salix have so far declined comment, sources indicate Valeant is concerned about paying too much for Salix. Salix has a market value of approximately $9 billion. An analyst with Sterne Agee Group, Shibani Malhotra, wrote in a Feb. 3, 2015 note that the shares could run more than $170 each after a takeover. As of today Salix stock is selling for $140.78 per share, up from a low of $130.65 yesterday.
It’s possible that other companies may be interested in Salix as well. Sources identified U.K.-based Shire PLC (ADR) as a potential competitor. Salix’s financial reporting fixes are expected to cut its fiscal year 2013 net revenue by almost $20 million, with net income being reduced by about $11.8 million. “We believe the resolution of the accounting-related overhang should ease investor concerns,” said Malhotra in a statement, “as reliable financials will be available near-term for investors as well as potential acquirers.”
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