April 15, 2016
By Alex Keown, BioSpace.com Breaking News Staff
LAVAL, Quebec – As Valeant faces the possibility of defaulting on some of its $30 billion in debt, the company has brought in investment banks to review its financial options, which could include divesting itself of some of its bigger assets, Reuters reported this morning.
Reuter’s information came from unnamed sources, but if accurate, that could signal that Valeant will stave off some of its debt by breaking apart the company it built through a series of aggressive M&A moves. But what those assets might be remain unclear. Both outgoing Chief Executive Officer Michael Pearson and top investor and board member Bill Ackman have indicated the company could look to dump “noncore assets.” Earlier this month Ackman indicated Bausch & Lomb was not for sale, as it was classified as a core asset.
Since announcing its openness to sell off noncore assets, Valeant has been approached by a number of inquiries from perspective buyers, the sources told Reuters.
Valeant’s stock is up slightly this morning, but that could be due to Legg Mason Inc.’s Bill Miller announcing he acquired Valeant stock on a bet it could double. Shares of Valeant have fallen about 85 percent since August of last year when it was as high as $263.70 per share. The stock is currently selling for $32.44 per share.
The embattled Canadian pharmaceutical company has talked about divesting itself of some of its assets in order to pay down its massive debt. At one time, Bausch & Lomb was considered by Ackman to be on the table for divesture, but that tune has changed. Since Ackman joined the company’s board of directors, Valeant, one of the recent kings of M&A activity, snapped up Bausch & Lomb in 2013 for $8.7 billion. The company known for its contact lens and lens-care products, generates about $1.5 billion in annual revenue. Bausch & Lomb has a long history of being a stable company and if Valeant would place the division up for sale, it would likely earn top dollar, Fox Business noted.
One asset that might be on the table is the irritable bowel syndrome treatment Xifaxan, which Valeant acquired last year when it snapped up Salix . Other assets that could be up for sale include the company’s aesthetics products, Obagi and Solta, Reuters said.
Valeant has a debt of about $30 billion in large part due to its string of acquisitions and sales of assets have been considered as an appropriate course of action by company leadership. The debt concern is even more concerning for the company as it is struggling to file its annual 10-K report to the U.S. Securities and Exchange Commission. Failing to file by the deadline could mean the company defaults on some of its debt. Valeant executives, including ousted Chief Executive Officer Michael Pearson, have been working to extend those deadlines. That delay was prompted after Valeant reported in February that it believes approximately $58 million of net revenues reported in the second half of 2014 “should not have been recognized upon delivery of product to Philidor.” Correcting the misstatements is “expected to reduce reported 2014 GAAP EPS by approximately $0.10 and increase 2015 GAAP EPS by approximately $0.09,” Valeant said, which is part of the reason the company was forced to delay filing its financial reports. Valeant laid the blame on Howard Schiller, the company’s former chief financial officer, who briefly served as interim-CEO while Pearson battled pneumonia. The company said the “improper conduct” of Schiller resulted in the provision of incorrect information to the company and “contributed to the misstatement of results.”
Because of its debt and other financial issues, Moody’s and S&P have downgraded the company’s credit rating.
Additionally lenders have “demanded higher coupon payments after the company violated certain debt agreements pertaining to the timing of the filing of its 10-K,” Reuters reported.
