Insight & Intelligence

More »

GEN News Highlights

More »
March 16, 2015

Endo Ends Effort to Wrest Merger-Bound Salix from Valeant

  • Endo International said today it will withdraw its $11.2 billion cash-and-stock offer for Salix Pharmaceuticals, ending its plans to outbid Valeant Pharmaceuticals International for the company—just hours after Valeant raised its bid for Salix, with approval from the gastrointestinal drug developer.

    "While we are disappointed with this outcome, we have been and will continue to be disciplined in our approach to potential acquisitions. We would like to wish Salix and Valeant continued success as they move forward with their transaction,” Endo said in a statement.

    Endo’s about-face came in the same morning that Valeant and Salix said that they agreed to a revised acquisition offer in which Valeant would shell out $173 per share cash rather than the original $158 per share cash offer—for a total “enterprise value” of $15.8 billion—reflecting market capitalization as well as debt, minority interest and preferred shares, less total cash and cash equivalents.

    Valeant’s revised offer was valid through April 7, and would revert to $158 per share the following day if all conditions to the tender offer were not satisfied. If the minimum tender condition is satisfied at the end of the day on March 31, 2015, Valeant said, it expects to close the transaction on April 1, 2015.

    The revised deal includes a $100 million higher termination fee payable by Salix to Valeant. That fee was originally set at $356 million, plus $60 million in related legal fees to Valeant should Salix backtrack from their deal. Also, the outside date after which either party may terminate the deal was moved forward from August 20, 2015 to May 1, 2015.

    The revised offer price includes approximately $1 billion in additional cash to Salix stockholders, and represents an increase of 9.49% and 43.9%, respectively, over the original offer price and the $120.19 price of Salix common stock on January 16.

    “This revised offer provides Salix shareholders with all-cash at a significant premium and the certainty to close by April 1.  By offering a significant premium with a 100% cash offer, eliminating market and company equity risk that could arise from other non-cash offers with a 4+ month closing timeline instead of a closing by April 1st, our new arrangement creates significant shareholder value for Salix.  In addition, the transaction remains modestly accretive in 2015 and will be more than 20% accretive in 2016.”

    Valeant’s revised offer is slightly below Endo’s $175 per share cash-and-stock offer disclosed on March 11. In it, Endo offered to buy all outstanding shares of Salix common stock for 1.4607 shares of Endo common stock—worth $130 per Salix common share, based on Endo’s March 10 closing share price of $89 per share—and $45 cash.

    In its statement today, Endo added that it will move forward with its growth strategies and active pipeline of acquisition targets across three core platforms—U.S. Branded Pharmaceuticals, U.S. Generic Pharmaceuticals, and International Pharmaceuticals.

    “As a next step, Endo is focusing our attention on other opportunities in our robust deal pipeline and on maximizing our organic growth initiatives including progressing our R&D pipeline,” Endo stated. “We will continue to drive Endo's growth as a global leader in specialty pharmaceuticals and look forward to creating value for our shareholders while improving patients' lives."

    Endo’s retreat came four days after the company’s CEO Rajiv De Silva delivered its offer in a letter to Tom D’Alonzo, Salix’s chairman and interim CEO. De Silva said Endo and Salix “would present a compelling combination and be a transformative transaction for Endo, thereby delivering substantial value for the stockholders of both of our companies.”