Endo International confirmed Wednesday it is looking to outbid Valeant Pharmaceuticals International for Salix Pharmaceuticals, through an $11.2 billion cash-and-stock offer that is almost 11% above the per-share price of the deal that the gastrointestinal drug developer and its planned acquirer disclosed just two weeks ago.
Endo is offering 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 closing share price Tuesday of $89 per share—and $45 cash.
Endo’s resulting $175 per share offer surpasses the $158 per-share cash bid agreed upon by Valeant and Salix when they disclosed their planned acquisition on February 22. Valeant’s bid was worth $10 billion, with a $14.5 billion “enterprise value”—reflecting market capitalization as well as debt, minority interest and preferred shares, less total cash and cash equivalents.
Should the deal go through, Salix shareholders would own about 40% of a combined Endo-Salix company, while Salix would also receive a seat on Endo’s board. However, Endo and Salix shareholders would have to approve the combination, unlike the Valeant offer, in which the boards of Valeant and Salix both approved the deal.
Also, Endo would also have to pay a $356 million “breakup” fee—about $5.50 per share—plus $60 million in related legal fees to Valeant should Salix backtrack from their deal.
Endo’s offer is the same as that made by Allergan last year in its unsuccessful attempt to buy Salix—in contrast with the $150 per share offered at the time by Endo.
In a letter delivered Wednesday to Tom D’Alonzo, Salix’s chairman and interim CEO, Endo president and CEO Rajiv De Silva said his company’s offer for 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.”
“Salix is a clear leader in the GI therapeutic area in the U.S., with a diversified portfolio of products and with a history of commercial success. Salix has a strong growth profile that is well aligned with Endo’s, De Silva added. “We think that Endo would bring significant management resources to continue to allow Salix to grow while utilizing our experience to help resolve any outstanding matters inhibiting growth.”
Valeant responded with a statement in which it said it was “firmly committed to our all-cash agreed transaction, which delivers immediate and certain value to Salix shareholders.”
“The tender offer is scheduled to expire at the end of the day on March 31, 2015, and Valeant expects to be in the position to close the transaction on April 1, 2015,” Valeant added.
Salix’s portfolio of 22 gastrointestinal drugs includes the prescription brands Xifaxan®, Uceris®, and Apriso®. Xifaxan (rifaximin) is expected to win near-term approval for a new indication, irritable bowel syndrome with diarrhea (IBS-D). The drug had a PDUFA goal decision date of February 28, but the FDA has extended that date by three months, to May 15.
Endo’s competing offer for Salix marks the second time in less than a year that it has played spoiler in order to grow through an acquisition. In October 2014, Endo persuaded Auxilium Pharmaceuticals to be acquired for $2.6 billion after terminating a planned $345 million merger with Canadian drug developer QLT.
