By Jonathan D. Rockoff and Liz Hoffman
Valeant Pharmaceuticals International Inc. said Sunday it would
buy Salix Pharmaceuticals Ltd. for about $10 billion, a return to
its big deal-making ways after a failed bid for Botox maker
Allergan Inc. last year.
Quebec-based Valeant said it would pay $158 a share in cash for
Salix. That is just above Friday's closing price of $157.85 for the
Raleigh, N.C., drug company's shares, which had risen recently on
reports of a potential deal.
The deal will take Valeant into a growing, multibillion-dollar
market for drugs treating stomach disorders like traveler's
diarrhea. Valeant estimates the overall U.S. market for
stomach-disorder treatments is $5 billion and growing 5% a year,
while Salix's sales are growing even faster than that.
Yet the deal will come at a cost for Valeant, roughly doubling
its debt to $31 billion, according to Chief Executive Michael
Pearson.
Also, Salix is a tarnished asset. In November, Salix disclosed a
revision to its wholesale-inventory levels that suggested demand
for its drugs might not be as high as previously thought. In recent
months, the company's chief financial officer and chief executive
have left.
Valeant expects to lose out on about $500 million in sales this
year as distributors reduce drug inventory levels to adjust for the
accounting issues, Mr. Pearson said.
Valeant sells eye and skin drugs. It had signaled in recent
months that it would focus on growing its own businesses, after the
company had failed to win Allergan. The Botox maker, which was
bought by Actavis PLC for $66 billion , criticized Valeant as a
deal machine.
Mr. Pearson said Valeant's fourth-quarter results, released
Sunday, showed that the company was growing its own business
substantially. Valeant reported total revenue of $8.3 billion last
year, up 43% over the prior year.
Write to Jonathan D. Rockoff at Jonathan.Rockoff@wsj.com and Liz
Hoffman at liz.hoffman@wsj.com
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