UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant
to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of the earliest event reported): April 7, 2015 (April 1, 2015)
Valeant Pharmaceuticals International, Inc.
(Exact name of registrant as specified in its charter)
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British Columbia, Canada
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001-14956
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98-0448205
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| (State or Other Jurisdiction
of Incorporation) |
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(Commission
File Number) |
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(I.R.S. Employer
Identification No.) |
2150 St. Elzéar Blvd. West
Laval, Quebec
Canada H7L
4A8
(Address of Principal Executive Offices)
Registrant’s telephone number, including area code: (514) 744-6792
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
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¨ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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¨ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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¨ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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¨ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 2.01. |
Completion of Acquisition or Disposition of Assets. |
As previously disclosed, Valeant
Pharmaceuticals International, Inc., a British Columbia corporation (the “Company” or “Valeant”) entered into an Agreement and Plan of Merger, dated as of February 20, 2015 (as amended, the “Merger Agreement”),
with Valeant Pharmaceuticals International, a Delaware corporation and wholly owned subsidiary of Valeant (“VPI”), Sun Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of VPI (“Purchaser”) and Salix
Pharmaceuticals, Ltd., a Delaware corporation (“Salix”). In accordance with the terms of the Merger Agreement, Purchaser commenced a tender offer (the “Offer”) for all of Salix’s outstanding shares of common stock, par value
$0.001 per share (the “Shares”), at a purchase price of $173.00 per Share, net to the holder in cash (the “Offer Price”), without interest, less any applicable withholding taxes and subject to reduction in the event the
conditions to the Offer were not satisfied by 12:00 midnight, Eastern time, April 8, 2015.
The Offer expired at 12:00 midnight,
Eastern time, on April 1, 2015 (one minute after 11:59 p.m., Eastern time on March 31, 2015) as scheduled and was not extended. According to Computershare Trust Company, N.A., the depositary for the Offer, 48,385,169 Shares were validly
tendered and not properly withdrawn, which represented approximately 75.25% of the outstanding Shares and a sufficient number of Shares such that the minimum tender condition to the Offer was satisfied. In addition, Notices of Guaranteed Delivery
were delivered with respect to 8,087,609 additional Shares, representing approximately 12.58% of the outstanding Shares. As a result, Purchaser accepted for payment all Shares that were validly tendered and not withdrawn.
Also, on April 1, 2015, Purchaser merged with and into Salix, with Salix surviving as a wholly owned subsidiary of the Company (the
“Merger”). The Merger was governed by Section 251(h) of the General Corporation Law of the State of Delaware, with no stockholder vote required to consummate the Merger. At the effective time of the Merger, each Share then outstanding
was converted into the right to receive $173.00 in cash, without interest, less any applicable withholding taxes, except for Shares then owned by Valeant, VPI or Purchaser or any of their respective wholly owned subsidiaries and Shares held in
treasury of Salix or by any of its wholly owned subsidiaries, which Shares were cancelled and retired and ceased to exist, and no consideration will be delivered in exchange therefor.
Each unexpired and unexercised option to purchase Shares (the “Salix Options”), whether or not then exercisable or vested, was
cancelled and, in exchange therefor, each former holder of any such cancelled Salix Option is entitled to receive, a payment in cash (subject to any applicable withholding or other taxes required by applicable law to be withheld) of an amount equal
to the product of (i) the total number of Shares previously subject to such Salix Option and (ii) the excess, if any, of $173.00 over the exercise price per Share previously subject to such Salix Option. Each unvested Share subject to
forfeiture restrictions, repurchase rights or other restrictions (the “Salix Restricted Stock”) automatically became fully vested and was cancelled and, in exchange therefor, each former holder of such cancelled Salix Restricted Stock is
entitled to receive, a payment in cash (subject to any applicable withholding or other taxes required by applicable law to be withheld) equal to $173.00 per share of Salix Restricted Stock.
The aggregate consideration paid by Purchaser in the Offer and Merger was approximately $11.3 billion, without giving effect to related
transaction fees and expenses. The Company provided Purchaser with the necessary funds to fund the Offer and the Merger through a combination of: (i) the proceeds of a registered offering of Valeant’s common shares in the United States
that closed on March 27, 2015; (ii) the proceeds from an issuance of senior unsecured notes by a subsidiary of Valeant pursuant to a Rule 144A (without registration rights) that closed on March 27, 2015; and (iii) the
$2,350,000,000 in proceeds from certain incremental term loan borrowings under a new series tranche B term loan (the “Closing Date Term Loans” and, together with an additional $1,800,000,000 of incremental term loan commitments under a new
series tranche B term loan and $1,000,000,000 of incremental term loans commitments under a new series tranche A term loan, collectively, the “Incremental Term Loans”) under Valeant’s existing credit agreement, dated as of
February 13, 2012 (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), by and among Valeant, certain subsidiaries of Valeant, as guarantors, the lenders party thereto from time to time,
Barclays Bank PLC (as successor to Goldman Sachs Lending Partners LLC), as administrative agent and as collateral agent, and the other agents party thereto, each on the terms previously disclosed in the Tender Offer Statement on Schedule TO filed by
the Company and Purchaser with the Securities and Exchange Commission on March 4, 2015, as amended.
The foregoing summary of the
Merger Agreement and the transactions contemplated thereby does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement attached as Exhibit 2.1 to the Current Report on Form 8-K filed by
the Company on February 23, 2015 as amended by Amendment No. 1 to the Merger Agreement attached as Exhibit 2.1 to the Current Report on Form 8-K filed by the Company on March 16, 2015, both of which are incorporated herein by
reference.
- 2 -
| Item 2.03 |
Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. |
Assumption of Obligations under Notes Indenture
As previously disclosed, on March 27, 2015, Valeant announced that VRX Escrow Corp., a newly formed wholly owned Canadian subsidiary of
Valeant (the “Escrow Issuer”), completed its previously announced offering of $2.0 billion aggregate principal amount of 5.375% senior unsecured notes due 2020 (the “2020 notes”), $3.25 billion aggregate principal amount of
5.875% senior unsecured notes due 2023 (the “2023 notes”), €1.5 billion aggregate principal amount of 4.50% senior unsecured notes due 2023 (the “Euro notes”) and $3.25 billion aggregate principal amount of 6.125% senior
unsecured notes due 2025 (together with the 2020 notes, the 2023 notes and the Euro notes, the “notes”). The gross proceeds of the issuance of the notes were placed into escrow pending consummation of the Offer and the Merger. In
connection with the consummation of the Offer and the Merger, the gross proceeds of the issuance of the notes were released from escrow and the obligations of the Escrow Issuer under the indenture governing the notes were assumed by Valeant.
Incremental Term Loans
Part of
the Offer and Merger consideration, the satisfaction and discharge of Salix’s 6.00% Senior Notes due 2021 and the repayment of Salix’s Credit Agreement, dated as of January 2, 2014, among Salix, the lenders from time to time party
thereto, and Jefferies Finance LLC, as administrative agent and collateral agent, was funded by a portion of the Incremental Term Loans under the Credit Agreement. The remaining undrawn portion of the Incremental Term Loans will be borrowed on a
delayed draw basis and will be used to finance amounts due in respect of Salix’s 2.75% Convertible Senior Notes due 2015 and 1.5% Convertible Senior Notes due 2019.
On April 1, 2015, the Company issued a press release announcing the
expiration and results of the Offer. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated herein by reference.
On April 1, 2015, the Company issued a press release announcing the consummation of the Merger. A copy of the press release is attached
hereto as Exhibit 99.2 and incorporated herein by reference.
| Item 9.01. |
Financial Statements and Exhibits. |
| (a) |
Financial Statements of Businesses Acquired |
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• |
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The financial statements required by Item 9.01(a) of Form 8-K are filed as Exhibit 99.3 to this Current Report on Form 8-K. The audited consolidated financial statements of Salix, comprised of consolidated balance
sheets as of December 31, 2014 and 2013 and the related consolidated statements of income, consolidated statements of comprehensive income, consolidated statements of equity and consolidated statements of cash flows for the three years in the period
ended December 31, 2014, the notes related thereto and the Reports of the Independent Registered Public Accounting Firm, are filed as Exhibit 99.3 hereto and are incorporated herein by reference. |
| (b) |
Pro Forma Financial Information |
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• |
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The unaudited pro forma condensed combined financial statements required by Item 9.01(b) of Form 8-K and accompanying notes are filed as Exhibit 99.4 to this Current Report on Form 8-K and are incorporated herein
by reference. |
- 3 -
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| Exhibit No. |
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Description |
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| 2.1 |
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Agreement and Plan of Merger, dated as of February 20, 2015, among Valeant Pharmaceuticals International, Inc., Valeant Pharmaceuticals International, Sun Merger Sub, Inc. and Salix Pharmaceuticals, Ltd. (incorporated by
reference to Exhibit 2.1 to Valeant’s Current Report on Form 8-K filed on February 23, 2015).* |
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| 2.2 |
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Amendment No. 1 to the Agreement and Plan of Merger, dated as of March 16, 2015, among Valeant Pharmaceuticals International, Inc., Valeant Pharmaceuticals International, Sun Merger Sub, Inc. and Salix Pharmaceuticals, Ltd.
(incorporated by reference to Exhibit 2.1 to Valeant’s Current Report on Form 8-K filed on March 16, 2015). |
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| 23.1 |
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Consent of Ernst & Young LLP |
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| 99.1 |
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Press Release issued by Valeant Pharmaceuticals International, Inc., dated April 1, 2015. |
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| 99.2 |
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Press Release issued by Valeant Pharmaceuticals International, Inc., dated April 1, 2015. |
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| 99.3 |
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Audited consolidated financial statements of Salix Pharmaceuticals, Ltd., comprised of consolidated balance sheets as of December 31, 2014 and 2013 and the related consolidated statements of income, consolidated statements of
comprehensive income, consolidated statements of equity and consolidated statements of cash flows for the three years in the period ended December 31, 2014, the notes related thereto and the Reports of the Independent Registered Public Accounting
Firm (incorporated by reference to Exhibit 99.1 to the third Current Report on Form 8-K filed by Valeant on March 16, 2015). |
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| 99.4 |
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Unaudited pro forma condensed combined financial statements as of and for the year ended December 31, 2014 and related notes. |
| * |
The Company will furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request; provided, however, that the Company may request confidential treatment pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934, as amended, for any schedule or exhibit so furnished. |
- 4 -
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Date: April 7, 2015
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| VALEANT PHARMACEUTICALS INTERNATIONAL, INC. |
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| By: |
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/s/ Robert R. Chai-Onn |
| Name: |
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Robert R. Chai-Onn |
| Title: |
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Executive Vice President, General Counsel & Chief Legal Officer, Head of Corporate & Business Development |
- 5 -
EXHIBIT INDEX
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| Exhibit No. |
|
Description |
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| 2.1 |
|
Agreement and Plan of Merger, dated as of February 20, 2015, among Valeant Pharmaceuticals International, Inc., Valeant Pharmaceuticals International, Sun Merger Sub, Inc. and Salix Pharmaceuticals, Ltd. (incorporated by reference
to Exhibit 2.1 to Valeant’s Current Report on Form 8-K filed on February 23, 2015).* |
|
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| 2.2 |
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Amendment No. 1 to the Agreement and Plan of Merger, dated as of March 16, 2015, among Valeant Pharmaceuticals International, Inc., Valeant Pharmaceuticals International, Sun Merger Sub, Inc. and Salix Pharmaceuticals, Ltd.
(incorporated by reference to Exhibit 2.1 to Valeant’s Current Report on Form 8-K filed on March 16, 2015). |
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| 23.1 |
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Consent of Ernst & Young LLP |
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| 99.1 |
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Press Release issued by Valeant Pharmaceuticals International, Inc., dated April 1, 2015. |
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| 99.2 |
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Press Release issued by Valeant Pharmaceuticals International, Inc., dated April 1, 2015. |
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| 99.3 |
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Audited consolidated financial statements of Salix Pharmaceuticals, Ltd., comprised of consolidated balance sheets as of December 31, 2014 and 2013 and the related consolidated statements of income, consolidated statements of
comprehensive income, consolidated statements of equity and consolidated statements of cash flows for the three years in the period ended December 31, 2014, the notes related thereto and the Reports of the Independent Registered Public Accounting
Firm (incorporated by reference to Exhibit 99.1 to the third Current Report on Form 8-K filed by Valeant on March 16, 2015). |
|
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| 99.4 |
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Unaudited pro forma condensed combined financial statements as of and for the year ended December 31, 2014 and related notes. |
| * |
The Company will furnish supplementally a copy of any omitted schedule or exhibit to the SEC upon request; provided, however, that the Company may request confidential treatment pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934, as amended, for any schedule or exhibit so furnished. |
- 6 -
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference of our report dated March 2, 2015, with respect to the consolidated financial statements and schedule of
Salix Pharmaceuticals, Ltd., and our report dated March 2, 2015, with respect to the effectiveness of internal control over financial reporting of Salix Pharmaceuticals, Ltd. included in the Current Report on Form 8-K of Valeant
Pharmaceuticals International, Inc. dated March 16, 2015 and incorporated by reference in this Current Report on Form 8-K of Valeant Pharmaceuticals International, Inc. into the following Registration Statements:
| |
(1) |
Registration Statement (Form S-3 No. 333-189192) of Valeant Pharmaceuticals International, Inc., |
| |
(2) |
Registration Statement (Form S-8 No. 333-92229) pertaining to the Stock Option Plan and Employee Stock Purchase Plan of Biovail Corporation International, |
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(3) |
Registration Statement (Form S-8 No. 333-138697) pertaining to the Equity Compensation Plan of Biovail Corporation, |
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(4) |
Registration Statement (Form S-8 No. 333-168629) pertaining to the Equity Compensation Plan of Biovail Corporation, |
| |
(5) |
Registration Statement (Form S-8 No. 333-196120) pertaining to the Omnibus Incentive Plan of Valeant Pharmaceuticals International, Inc., |
| |
(6) |
Registration Statement (Form S-8 No. 333-176205) pertaining to the Omnibus Incentive Plan of Valeant Pharmaceuticals International, Inc., and |
| |
(7) |
Registration Statement (Form S-8 No. 333-168254) pertaining to the Equity Incentive Plans of Valeant Pharmaceuticals International, Inc. |
/s/ Ernst and Young
Raleigh, North Carolina
April 7, 2015
Exhibit 99.1
International Headquarters
2150 St.
Elzéar Blvd. West
Laval, Quebec H7L 4A8
Phone: 514.744.6792
Fax:
514.744.6272
Contact Information:
Laurie W. Little
Valeant Pharmaceuticals International, Inc.
949-461-6002
laurie.little@valeant.com
Media:
Renee E. Soto/Meghan Gavigan
Sard Verbinnen & Co.
212-687-8080
rsoto@sardverb.com / mgavigan@sardverb.com
VALEANT PHARMACEUTICALS INTERNATIONAL, INC. COMPLETES
TENDER OFFER FOR SALIX PHARMACEUTICALS, LTD.
Laval, Quebec — April 1, 2015 — Valeant Pharmaceuticals International, Inc. (NYSE: VRX and TSX: VRX)
(“Valeant”) today announced the expiration of the tender offer (the “Offer”) by a subsidiary of Valeant Pharmaceuticals International (“VPI”) to purchase all of the outstanding shares of Salix Pharmaceuticals, Ltd.
(NASDAQ: SLXP) (“Salix”) for a price of $173.00 per share in cash, without interest, less any applicable withholding taxes. The Offer expired at midnight, Eastern time, on April 1, 2015. Valeant expects to complete today the
acquisition of Salix through a merger without a vote of the Salix stockholders pursuant to Section 251(h) of the Delaware General Corporation Law.
Computershare Trust Company, N.A., the depositary for the tender offer, has advised that, as of the expiration of the Offer, a total of
48,385,169 shares had been tendered into and not validly withdrawn from the Offer, representing approximately 75.25% of Salix’s outstanding shares and a sufficient number of shares such that the minimum tender condition to the Offer was
satisfied. Additionally, the depositary has advised that an additional 8,087,609 shares had been tendered by notice of guaranteed delivery, representing approximately 12.58% of Salix’s outstanding shares. Accordingly, all shares that were
validly tendered and not properly withdrawn were accepted for payment and Valeant will promptly pay for all such tendered shares in accordance with the terms of the Offer.
As a result of the merger, Salix will become a wholly owned subsidiary of VPI. In the merger, each share of Salix (other than those shares
held by Valeant or Salix or any of their respective subsidiaries) will be cancelled and converted into the right to receive the same $173.00 per share in cash, without interest, less any applicable withholding taxes, that was paid in the Offer.
Following completion of the merger, the common stock of Salix will no longer be listed for trading on the NASDAQ Global Select Market, which is expected to take effect later today.
About Valeant Pharmaceuticals International, Inc.
Valeant Pharmaceuticals International, Inc. (NYSE/TSX: VRX) is a multinational specialty pharmaceutical company that develops, manufactures and
markets a broad range of pharmaceutical products primarily in the areas of dermatology, eye health, neurology, and branded generics. More information about Valeant Pharmaceuticals International, Inc. can be found at www.valeant.com.
Forward Looking Statements
This press
release may contain forward-looking statements, including, but not limited to, the consummation of the acquisition of Salix. Forward-looking statements may generally be identified by the use of the words “anticipates,” “expects,”
“intends,” “plans,” “should,” “could,” “would,” “may,” “will,” “believes,” “estimates,” “potential,” “target,” or “continue” and
variations or similar expressions. These statements are based upon the current expectations and beliefs of management and are subject to certain risks and uncertainties that could cause actual results to differ materially from those described in the
forward-looking statements. These risks and uncertainties include, but are not limited to, risks and uncertainties discussed in our most recent annual and quarterly reports and detailed from time to time in our other filings with the Securities and
Exchange Commission and the Canadian Securities Administrators, which risks and uncertainties are incorporated herein by reference. Readers are cautioned not to place undue reliance on any of these forward-looking statements. These forward-looking
statements speak only as of the date hereof. We undertake no obligation to update any of these forward-looking statements to reflect events or circumstances after the date of this press release or to reflect actual outcomes, except as required by
law.
###
Exhibit 99.2
International Headquarters
2150 St.
Elzéar Blvd. West
Laval, Quebec H7L 4A8
Phone: 514.744.6792
Fax:
514.744.6272
Contact Information:
Laurie W. Little
949-461-6002
laurie.little@valeant.com
Media:
Renee E. Soto/Meghan Gavigan
Sard Verbinnen & Co.
212-687-8080
rsoto@sardverb.com / mgavigan@sardverb.com
VALEANT PHARMACEUTICALS INTERNATIONAL, INC. COMPLETES
ACQUISITION OF SALIX PHARMACEUTICALS
Laval, Quebec — April 1, 2015 — Valeant Pharmaceuticals International, Inc. (NYSE: VRX and TSX: VRX) today announced it
has completed the previously announced acquisition of Salix Pharmaceuticals, Ltd. Salix Pharmaceuticals is a specialty pharmaceutical company that offers innovative gastroenterology treatments such as XIFAXAN® (rifaximin) 550 mg, RUCONEST® (C1 esterase inhibitor [recombinant]), APRISO® (mesalamine), UCERIS® (budesonide) extended release tablets and
RELISTOR® (methylnaltrexone bromide).
About Valeant Pharmaceuticals International, Inc.
Valeant Pharmaceuticals International, Inc. (NYSE/TSX: VRX) is a multinational specialty pharmaceutical company that develops,
manufactures and markets a broad range of pharmaceutical products primarily in the areas of dermatology, eye health, neurology, and branded generics. More information about Valeant Pharmaceuticals International, Inc. can be found at
www.valeant.com.
###
Exhibit 99.4
VALEANT PHARMACEUTICALS INTERNATIONAL, INC. AND SALIX PHARMACEUTICALS, LTD
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The unaudited pro forma condensed combined statement of loss for the year ended December 31, 2014 has been prepared by Valeant
Pharmaceuticals International, Inc. (“Valeant”) and gives effect to the acquisition of Salix Pharmaceuticals, Ltd. (“Salix”) by Valeant, including the related debt and equity issued by Valeant to finance the acquisition, as if
such transactions had occurred on January 1, 2014.
The unaudited pro forma condensed combined balance sheet as of December 31,
2014 combines the historical consolidated balance sheets of Valeant and Salix, giving effect to the acquisition of Salix, including the debt and equity issued by Valeant to finance the acquisition, as if such transactions had occurred on
December 31, 2014.
The historical consolidated financial information has been adjusted to give effect to pro forma events that are
(1) directly attributable to the aforementioned transactions, (2) factually supportable, and (3) with respect to the statement of loss, expected to have a continuing impact on the combined results. The unaudited pro forma
condensed combined financial statements should be read in conjunction with the accompanying notes to the unaudited pro forma condensed combined financial statements. In addition, the unaudited pro forma condensed combined financial statements
were based on and should be read in conjunction with the:
| |
• |
|
separate audited consolidated financial statements of Valeant as of and for the year ended December 31, 2014 and the related notes, included in Valeant’s Annual Report on Form 10-K for the year ended
December 31, 2014; and |
| |
• |
|
separate audited consolidated financial statements of Salix as of and for the year ended December 31, 2014 and the related notes, incorporated herein by reference to Valeant’s Current Report on Form 8-K, filed
on March 16, 2015. |
The unaudited pro forma condensed combined financial statements have been presented for
informational purposes only. The pro forma information is not necessarily indicative of what the combined company’s financial position or results of operations actually would have been had the acquisition of Salix or the related financing
transactions been completed as of the dates indicated. In addition, the unaudited pro forma condensed combined financial statements do not purport to project the future financial position or operating results of the combined company. There were
no material transactions between Valeant and Salix during the period presented in the unaudited pro forma condensed combined financial statements that would need to be eliminated.
The unaudited pro forma condensed combined financial statements have been prepared using the acquisition method of accounting under United
States generally accepted accounting principles (“U.S. GAAP”). The accounting for the acquisition of Salix is dependent upon certain valuations that are provisional and are subject to change. Accordingly, the pro forma adjustments are
preliminary and have been made solely for the purpose of providing these unaudited pro forma condensed combined financial statements. Differences between these preliminary estimates and the final acquisition accounting may occur and these
differences could be material. The differences, if any, could have a material impact on the accompanying unaudited pro forma condensed combined financial statements and Valeant’s future results of operations and financial position.
In addition, the unaudited pro forma condensed combined financial statements do not reflect any cost savings, operating synergies or revenue
enhancements that the combined company may achieve as a result of the acquisition of Salix, the costs to integrate the operations of Valeant and Salix or the costs necessary to achieve these cost savings, operating synergies and revenue
enhancements.
Subsequent to December 31, 2014, Valeant has completed the following transactions:
| |
• |
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the redemption of the remaining $499.6 million aggregate principal amount of its 6.875% senior notes due 2018; |
| |
• |
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the issuance of $1.0 billion aggregate principal amount of 5.50% senior unsecured notes due 2023; |
| |
• |
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the execution of joinder agreements to allow for an increase in commitment under the revolving credit facility to $1.5 billion and the issuance of $250.0 million in incremental term loans under the Series A-3 Tranche A
Term Loan Facility under Valeant’s Third Amended and Restated Credit and Guaranty Agreement, as amended (the “Credit Agreement”); |
| |
• |
|
the acquisition of a portfolio of hospital products from Marathon Pharmaceuticals, LLC; and |
| |
• |
|
the acquisition of the assets of Dendreon Corporation, including the worldwide rights to the Provenge ® product. |
These transactions are not directly attributable to the acquisition of Salix by Valeant and, as such, the unaudited pro forma condensed
combined financial statements do not give effect to these transactions.
Furthermore, Valeant’s historical consolidated statement of
income for the year ended December 31, 2014 included (1) a net gain of $323.9 million within other income resulting from the divestiture of its facial aesthetic fillers and toxins product rights and (2) a net gain of $286.7 million
within gain on investments, net from the sale by PS Fund 1, LLC of shares of Allergan Inc. (“Allergan”) common stock allocable to Valeant, and the termination of its agreement with Pershing Square Capital Management L.P. as a result of
Valeant’s withdrawal of the exchange offer to acquire all of the outstanding shares of Allergan. The unaudited pro forma condensed combined financial statements have not been adjusted to exclude the effect of these transactions.
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF LOSS
For
the year ended December 31, 2014
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Valeant |
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Salix |
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Pro forma
adjustments
(Note 6) |
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Valeant/Salix
combined
Pro forma |
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I |
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II |
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III |
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I + II + III |
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(All dollar amounts expressed in millions of U.S. dollars, except per share data) |
|
| Revenues |
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| Product sales |
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$ |
8,103.6 |
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$ |
1,133.5 |
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$ |
— |
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$ |
9,237.1 |
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| Other revenues |
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159.9 |
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— |
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— |
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159.9 |
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8,263.5 |
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1,133.5 |
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— |
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9,397.0 |
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| Expenses |
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| Cost of goods sold (exclusive of amortization and impairments of finite-lived intangible assets shown separately below) |
|
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2,196.2 |
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|
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337.8 |
|
|
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(22.5 |
) |
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(b |
) |
|
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2,511.5 |
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| Cost of other revenues |
|
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58.4 |
|
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— |
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— |
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58.4 |
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| Selling, general and administrative |
|
|
2,026.3 |
|
|
|
660.1 |
|
|
|
(150.4 |
) |
|
|
(a |
) |
|
|
2,536.0 |
|
| Research and development |
|
|
246.0 |
|
|
|
170.3 |
|
|
|
(69.5 |
) |
|
|
(a |
) |
|
|
346.8 |
|
| Amortization and impairments of finite-lived intangible assets |
|
|
1,550.7 |
|
|
|
216.1 |
|
|
|
535.9 |
|
|
|
(a |
),(c) |
|
|
2,302.7 |
|
| Restructuring, integration and other costs |
|
|
381.7 |
|
|
|
— |
|
|
|
5.0 |
|
|
|
(a |
) |
|
|
386.7 |
|
| In-process research and development impairments and other charges |
|
|
41.0 |
|
|
|
— |
|
|
|
64.5 |
|
|
|
(a |
) |
|
|
105.5 |
|
| Acquisition-related costs |
|
|
6.3 |
|
|
|
— |
|
|
|
148.5 |
|
|
|
(a |
),(g) |
|
|
154.8 |
|
| Acquisition-related contingent consideration |
|
|
(14.1 |
) |
|
|
77.0 |
|
|
|
— |
|
|
|
|
|
|
|
62.9 |
|
| Other income |
|
|
(268.7 |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
(268.7 |
) |
| Intangible impairment charges |
|
|
— |
|
|
|
162.3 |
|
|
|
(162.3 |
) |
|
|
(a |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,223.8 |
|
|
|
1,623.6 |
|
|
|
349.2 |
|
|
|
|
|
|
|
8,196.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Operating income (loss) |
|
|
2,039.7 |
|
|
|
(490.1 |
) |
|
|
(349.2 |
) |
|
|
|
|
|
|
1,200.4 |
|
| Interest income |
|
|
5.0 |
|
|
|
— |
|
|
|
1.0 |
|
|
|
(a |
) |
|
|
6.0 |
|
| Interest expense |
|
|
(971.0 |
) |
|
|
(170.8 |
) |
|
|
(630.6 |
) |
|
|
(d |
) |
|
|
(1,772.4 |
) |
| Loss on extinguishment of debt |
|
|
(129.6 |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
(129.6 |
) |
| Foreign exchange and other |
|
|
(144.1 |
) |
|
|
— |
|
|
|
(3.7 |
) |
|
|
(a |
) |
|
|
(147.8 |
) |
| Gain on investments, net |
|
|
292.6 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
292.6 |
|
| Interest and other expense |
|
|
— |
|
|
|
(2.7 |
) |
|
|
2.7 |
|
|
|
(a |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Income (loss) before provision for (recovery of) income taxes |
|
|
1,092.6 |
|
|
|
(663.6 |
) |
|
|
(979.8 |
) |
|
|
|
|
|
|
(550.8 |
) |
| Provision for (recovery of) income taxes |
|
|
180.4 |
|
|
|
(248.7 |
) |
|
|
(260.1 |
) |
|
|
(e |
) |
|
|
(328.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net income (loss) |
|
$ |
912.2 |
|
|
$ |
(414.9 |
) |
|
$ |
(719.7 |
) |
|
|
|
|
|
$ |
(222.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net loss attributable to non controlling interest |
|
|
(1.3 |
) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
(1.3 |
) |
| Net income (loss) attributable to Valeant |
|
$ |
913.5 |
|
|
$ |
(414.9 |
) |
|
$ |
(719.7 |
) |
|
|
|
|
|
$ |
(221.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic income (loss) per share |
|
$ |
2.72 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(0.65 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Diluted income (loss) per share |
|
$ |
2.67 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(0.65 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Weighted-average number of common shares outstanding (in millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
|
|
335.4 |
|
|
|
|
|
|
|
7.3 |
|
|
|
(t |
) |
|
|
342.7 |
|
| Diluted |
|
|
341.5 |
|
|
|
|
|
|
|
7.3 |
|
|
|
(t |
) |
|
|
342.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See the accompanying notes to the unaudited pro forma condensed combined financial statements, which are an
integral part of these statements. The pro forma adjustments are explained in Note 6. Pro Forma Adjustments in Connection with the Salix Acquisition.
UNAUDITED PRO FORMA CONDENSED COMBINED
BALANCE SHEET
As of
December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Valeant |
|
|
Salix |
|
|
Pro forma
adjustments
(Note 6) |
|
|
|
|
|
Valeant/Salix
combined
Pro forma |
|
| |
|
I |
|
|
II |
|
|
III |
|
|
|
|
|
I + II + III |
|
| |
|
(All dollar amounts expressed in millions of U.S. dollars) |
|
| Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents |
|
$ |
322.6 |
|
|
$ |
499.3 |
|
|
$ |
(12.9 |
) |
|
|
(r |
) |
|
$ |
809.0 |
|
| Trade receivables, net |
|
|
2,075.8 |
|
|
|
42.5 |
|
|
|
(42.5 |
) |
|
|
(a |
) |
|
|
2,075.8 |
|
| Inventories, net |
|
|
950.6 |
|
|
|
175.2 |
|
|
|
102.6 |
|
|
|
(f |
) |
|
|
1,228.4 |
|
| Prepaid expenses and other current assets |
|
|
641.9 |
|
|
|
81.3 |
|
|
|
(10.5 |
) |
|
|
(h |
) |
|
|
712.7 |
|
| Assets held for sale |
|
|
8.9 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
8.9 |
|
| Deferred tax assets, net |
|
|
193.3 |
|
|
|
207.7 |
|
|
|
79.5 |
|
|
|
(e |
) |
|
|
480.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total current assets |
|
|
4,193.1 |
|
|
|
1,006.0 |
|
|
|
116.2 |
|
|
|
|
|
|
|
5,315.3 |
|
| Property, plant and equipment, net |
|
|
1,310.5 |
|
|
|
34.9 |
|
|
|
— |
|
|
|
|
|
|
|
1,345.4 |
|
| Intangible assets, net |
|
|
11,255.9 |
|
|
|
1,633.1 |
|
|
|
11,357.4 |
|
|
|
(i |
) |
|
|
24,246.4 |
|
| Goodwill |
|
|
9,346.4 |
|
|
|
1,349.1 |
|
|
|
5,634.2 |
|
|
|
(j |
) |
|
|
16,329.7 |
|
| Deferred tax assets, net |
|
|
54.0 |
|
|
|
— |
|
|
|
— |
|
|
|
(e |
) |
|
|
54.0 |
|
| Other long-term assets, net |
|
|
193.1 |
|
|
|
94.3 |
|
|
|
(29.7 |
) |
|
|
(k |
) |
|
|
257.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total assets |
|
$ |
26,353.0 |
|
|
$ |
4,117.4 |
|
|
$ |
17,078.1 |
|
|
|
|
|
|
$ |
47,548.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accounts payable |
|
$ |
398.0 |
|
|
$ |
45.6 |
|
|
$ |
— |
|
|
|
|
|
|
$ |
443.6 |
|
| Accrued and other current liabilities |
|
|
2,179.4 |
|
|
|
179.2 |
|
|
|
226.9 |
|
|
|
(a |
),(l) |
|
|
2,585.5 |
|
| Acquisition-related contingent consideration |
|
|
141.8 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
141.8 |
|
| Current portion of long-term debt |
|
|
0.9 |
|
|
|
— |
|
|
|
— |
|
|
|
(a |
),(m) |
|
|
0.9 |
|
| Deferred tax liabilities, net |
|
|
10.7 |
|
|
|
— |
|
|
|
— |
|
|
|
(e |
) |
|
|
10.7 |
|
| Current portion of convertible senior notes |
|
|
— |
|
|
|
921.1 |
|
|
|
(921.1 |
) |
|
|
(a |
) |
|
|
— |
|
| Current portion of Term Loan B credit facility |
|
|
— |
|
|
|
60.0 |
|
|
|
(60.0 |
) |
|
|
(a |
) |
|
|
— |
|
| Reserve for product returns, rebates, chargebacks, and patient-focused promotional programs |
|
|
— |
|
|
|
269.4 |
|
|
|
(269.4 |
) |
|
|
(a |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total current liabilities |
|
|
2,730.8 |
|
|
|
1,475.3 |
|
|
|
(1,023.6 |
) |
|
|
|
|
|
|
3,182.5 |
|
| Acquisition-related contingent consideration |
|
|
167.0 |
|
|
|
151.3 |
|
|
|
— |
|
|
|
|
|
|
|
318.3 |
|
| Long-term debt |
|
|
15,253.7 |
|
|
|
— |
|
|
|
15,024.7 |
|
|
|
(a |
),(m) |
|
|
30,278.4 |
|
| Pension and other benefit liabilities |
|
|
239.8 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
239.8 |
|
| Liabilities for uncertain tax positions |
|
|
102.6 |
|
|
|
— |
|
|
|
15.9 |
|
|
|
(a |
) |
|
|
118.5 |
|
| Deferred tax liabilities, net |
|
|
2,227.5 |
|
|
|
284.5 |
|
|
|
4,088.7 |
|
|
|
(e |
) |
|
|
6,600.7 |
|
| Other long-term liabilities |
|
|
197.1 |
|
|
|
15.3 |
|
|
|
(15.9 |
) |
|
|
(a |
),(n) |
|
|
196.5 |
|
| Lease incentive obligation |
|
|
— |
|
|
|
9.1 |
|
|
|
(9.1 |
) |
|
|
(a |
) |
|
|
— |
|
| Term Loan B credit facility |
|
|
— |
|
|
|
1,080.0 |
|
|
|
(1,080.0 |
) |
|
|
(a |
) |
|
|
— |
|
| 2021 senior notes |
|
|
— |
|
|
|
750.0 |
|
|
|
(750.0 |
) |
|
|
(a |
) |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total liabilities |
|
|
20,918.5 |
|
|
|
3,765.5 |
|
|
|
16,250.7 |
|
|
|
|
|
|
|
40,934.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Unamortized debt discount due on conversion of senior notes |
|
|
— |
|
|
|
113.6 |
|
|
|
(113.6 |
) |
|
|
(m |
) |
|
|
— |
|
| Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common shares |
|
|
8,349.2 |
|
|
|
0.1 |
|
|
|
1,431.7 |
|
|
|
(o |
) |
|
|
9,781.0 |
|
| Additional paid-in capital |
|
|
243.9 |
|
|
|
595.1 |
|
|
|
(595.1 |
) |
|
|
(p |
) |
|
|
243.9 |
|
| Accumulated deficit |
|
|
(2,365.0 |
) |
|
|
(355.5 |
) |
|
|
103.0 |
|
|
|
(s |
) |
|
|
(2,617.5 |
) |
| Accumulated other comprehensive loss |
|
|
(915.9 |
) |
|
|
(1.4 |
) |
|
|
1.4 |
|
|
|
(q |
) |
|
|
(915.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total shareholders’ equity |
|
|
5,312.2 |
|
|
|
238.3 |
|
|
|
941.0 |
|
|
|
|
|
|
|
6,491.5 |
|
| Noncontrolling interest |
|
|
122.3 |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
122.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total equity |
|
|
5,434.5 |
|
|
|
238.3 |
|
|
|
941.0 |
|
|
|
|
|
|
|
6,613.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total liabilities and equity |
|
$ |
26,353.0 |
|
|
$ |
4,117.4 |
|
|
$ |
17,078.1 |
|
|
|
|
|
|
$ |
47,548.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See the accompanying notes to the unaudited pro forma condensed combined financial statements, which are an
integral part of these statements. The pro forma adjustments are explained in Note 6. Pro Forma Adjustments in Connection with the Salix Acquisition.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
| 1. |
Description of Transaction |
On April 1, 2015, Valeant completed the acquisition of
Salix, pursuant to the agreement and plan of merger dated February 20, 2015 (as amended on March 16, 2015, the “Merger Agreement”), among Valeant, Valeant Pharmaceutical International, Sun Merger Sub, Inc., a Delaware corporation
and wholly-owned subsidiary of Valeant (“Merger Sub”), and Salix (the “Salix Acquisition”). Subject to the terms and conditions set forth in the Merger Agreement, Salix became a wholly-owned subsidiary of Valeant.
On the date of the Salix Acquisition, each share of Salix common stock, issued and outstanding immediately prior to the date of the Salix
Acquisition was converted into the right to receive $173.00 in cash (the “Per Share Merger Consideration”), without interest.
Each Salix stock option, unexpired and unexercised, that was outstanding immediately prior to the date of the Salix Acquisition was cancelled
and converted into the right to receive an amount equal to the excess, if any, of the Per Share Merger Consideration over the exercise price of such stock option, as applicable. Each share of Salix restricted stock, whether vested or unvested, that
was outstanding immediately prior to the date of the Salix Acquisition was cancelled and converted into the right to receive the Per Share Merger Consideration.
The Salix Acquisition was financed with debt and equity issuances, which are further discussed in Note 6. The net proceeds from the debt and
equity issuances were utilized to fund (i) the Salix Acquisition, (ii) the repayment, termination and discharge of Salix’s outstanding indebtedness, and (iii) the related transaction costs and expenses.
The unaudited pro forma condensed combined financial statements
were prepared using the acquisition method of accounting in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, with Valeant being the legal
and accounting acquirer, and uses the fair value concepts defined in ASC Topic 820, Fair Value Measurement, and was based on the historical financial statements of Valeant and Salix.
Under the acquisition method of accounting, the assets acquired and liabilities assumed are recorded as of the completion of the Salix
Acquisition, primarily at their respective fair values and added to those of Valeant. Financial statements and reported results of operations of Valeant issued after completion of the Salix Acquisition will reflect these values, but will not be
retroactively restated to reflect the historical financial position or results of operations of Salix.
Under ASC 805, acquisition-related
transaction costs (i.e., advisory, legal, valuation, other professional fees) and certain acquisition-related restructuring charges are not included as a component of consideration transferred but are accounted for as expenses in the periods in
which the costs are incurred. Total acquisition-related transaction costs incurred by Valeant in connection with the Salix Acquisition totaled to approximately $80 million (including the commitment fee incurred by Valeant relating to the bridge loan
facility obtained in connection with the Salix Acquisition). The estimated transaction costs are reflected in the unaudited pro forma condensed combined balance sheet as of December 31, 2014 as a reduction to cash and cash equivalents and an
increase to accumulated deficit.
In addition, the unaudited pro forma condensed combined financial statements do not reflect any cost
savings, operating synergies or revenue enhancements that the combined company may achieve as a result of the acquisition of Salix, the costs to integrate the operations of Valeant and Salix or the costs necessary to achieve these cost savings,
operating synergies and revenue enhancements.
Valeant is in the process of performing a detailed review of
Salix’s accounting policies and to date, no material difference has been identified other than those described in Note 6(a) and 6(b). Valeant will complete this review in the post-combination period and as a result of the review, Valeant may
identify additional differences between the accounting policies of the two companies that, when conformed, could have a material impact on the combined financial statements.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS—(Continued)
| 4. |
Fair Value of Consideration Transferred in Connection with the Salix Acquisition |
The
following is a preliminary estimate of the purchase price for the Salix Acquisition:
|
|
|
|
|
|
|
|
|
| (In millions except per share data) |
|
Conversion
Calculation |
|
|
Estimated
Fair Value |
|
| Number of shares of Salix common stock outstanding as of the acquisition date |
|
|
64.2 |
|
|
|
|
|
| Multiplied by Per Share Merger Consideration(a) |
|
$ |
173.00 |
|
|
$ |
11,123.9 |
|
|
|
|
|
|
|
|
|
|
| Number of outstanding stock options cancelled and exchanged for cash(b) |
|
|
0.1 |
|
|
|
10.1 |
|
| Number of outstanding restricted stock cancelled and exchanged for cash(b) |
|
|
1.1 |
|
|
|
195.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,329.0 |
|
| Less: Cash consideration paid for Salix’s restricted stock that was accelerated at the closing of the Salix
Acquisition(b) |
|
|
|
|
|
|
(164.5 |
) |
| Add: Payment of Salix’s Term Loan B Credit Facility(c) |
|
|
|
|
|
|
1,125.2 |
|
| Add: Payment of Salix’s 6.00% Senior Notes due 2021(c) |
|
|
|
|
|
|
841.1 |
|
|
|
|
|
|
|
|
|
|
| Total |
|
|
|
|
|
$ |
13,130.8 |
|
|
|
|
|
|
|
|
|
|
| (a) |
Pursuant to the Merger Agreement, at the date of the Salix Acquisition, each share of Salix common stock issued and outstanding immediately prior to the date of the Salix Acquisition was converted into the right to
receive the Per Share Merger Consideration, without interest. |
| (b) |
Each Salix stock option, unexpired and unexercised, that was outstanding immediately prior to the date of the Salix Acquisition was cancelled and converted into the right to receive an amount equal to the excess, if
any, of the Per Share Merger Consideration over the exercise price of such stock option, as applicable. Each share of Salix restricted stock, whether vested or unvested, that was outstanding immediately prior to the date of the Salix Acquisition was
cancelled and converted into the right to receive the Per Share Merger Consideration. |
| |
In accordance with ASC 805, the purchase consideration paid to holders of Salix stock options and restricted stock attributable to pre-combination services has been included as a component of purchase price.
|
| |
Cash consideration paid for outstanding restricted stock that was accelerated, by Valeant, in connection with the Salix Acquisition is accounted for as post-combination expense and, consequently, has been excluded from
estimated purchase price. For purposes of the unaudited pro forma condensed combined financial statements, cash consideration paid for outstanding restricted stock, attributable to post-combination service, has been recorded as a reduction to cash
and cash equivalents and an increase to accumulated deficit. |
| |
In addition, the cash consideration paid for outstanding Salix stock options and restricted stock approximated the fair value of those options and restricted stock. Accordingly, no portion of the cash consideration paid
for stock options and restricted stock attributable to pre-combination services has been reflected as compensation expense for purposes of the unaudited pro forma condensed combined financial statements. |
| (c) |
The repayment of Salix’s Term Loan B Credit Facility has been reflected as part of the purchase consideration as the debt was repaid concurrently with the consummation of the Salix Acquisition and was not assumed
by Valeant as part of the acquisition. Similarly, the redemption of Salix’s 6.00% Senior Notes due 2021 has been reflected as part of the purchase consideration as the indenture governing the 6.00% Senior Notes due 2021 was satisfied and
discharged concurrently with the consummation of the Salix Acquisition and was not assumed by Valeant as part of the acquisition. |
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS—(Continued)
| 5. |
Assets Acquired and Liabilities Assumed in Connection with the Salix Acquisition |
Assuming an acquisition date of December 31, 2014, the following is a preliminary estimate of the assets acquired and the liabilities
assumed by Valeant in connection with the Salix Acquisition, reconciled to the estimated purchase price:
|
|
|
|
|
| (In millions) |
|
|
|
| Cash and cash equivalents(a) |
|
$ |
398.8 |
|
| Inventories(b) |
|
|
277.8 |
|
| Other current assets(c) |
|
|
1,380.2 |
|
| Property, plant and equipment(d) |
|
|
34.9 |
|
| Intangible assets(e) |
|
|
12,990.5 |
|
| Other assets |
|
|
38.9 |
|
| Accounts payable |
|
|
(45.6 |
) |
| Other current liabilities(f) |
|
|
(1,530.8 |
) |
| Long-term debt(g) |
|
|
(3,125.6 |
) |
| Other liabilities |
|
|
(166.6 |
) |
| Deferred tax liabilities, net(h) |
|
|
(4,105.0 |
) |
|
|
|
|
|
| Total identifiable net assets acquired |
|
|
6,147.5 |
|
|
|
|
|
|
| Goodwill(i) |
|
|
6,983.3 |
|
|
|
|
|
|
| Estimated purchase price |
|
$ |
13,130.8 |
|
|
|
|
|
|
| (a) |
Cash has been reduced by $100.5 million for payments made by Salix, subsequent to December 31, 2014 and prior to the consummation of the Salix Acquisition, for transaction fees incurred by Salix in connection with
the sale of the company. |
| (b) |
A preliminary fair value estimate of $277.8 million has been assigned to inventories acquired. The pro forma fair value adjustment to inventories acquired is based on Salix’s inventories as of December 31,
2014, adjusted as follows based on Valeant management’s estimates using the following methods: |
| |
i. |
Finished goods at estimated selling prices less the sum of costs of disposal and a reasonable profit allowance for the selling effort of a market participant; |
| |
ii. |
Work in process at estimated selling prices of finished goods less the sum of costs to complete, costs of disposal, and a reasonable profit allowance for the completing and selling effort of a market participant based
on profit for similar finished goods; and |
| |
iii. |
Raw materials at current replacement costs. |
| (c) |
Includes an estimated fair value of $1,266.9 million to record the capped call transactions and convertible bond hedge transactions that were entered into by Salix in connection with its 1.5% Convertible Senior Notes
due 2019 and 2.75% Convertible Senior Notes due 2015. |
| (d) |
A preliminary fair value estimate of $34.9 million has been assigned to property and equipment acquired. Valeant has assumed Salix’s historical net book value approximates fair value for these assets for purposes
of these unaudited pro forma condensed combined financial statements. The fair value of property and equipment was estimated based on a review of the assets’ remaining useful lives, current replacement costs, and disposal costs. The assumptions
used to determine the fair value of Salix’s property and equipment may change as Valeant conducts, with the assistance of a third party appraiser, a valuation of Salix’s property and equipment following the completion of the acquisition.
|
| (e) |
A preliminary fair value estimate of $12,990.5 million has been assigned to intangible assets acquired, primarily consisting of product rights (inclusive of trademarks and technology/patents), corporate brand, and
in-process research and development (“IPR&D”). Amortization related to the fair value of the finite-lived intangible assets has been reflected as a pro forma adjustment to the unaudited pro forma condensed combined statement of loss.
|
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS—(Continued)
The fair value of the identifiable intangible assets and their weighted-average useful lives are as follows:
|
|
|
|
|
|
|
|
|
| (In millions) |
|
Estimated
Fair Value |
|
|
Average
Estimated Useful |
|
| Product rights |
|
$ |
6,636.6 |
|
|
|
12 |
|
| Corporate brand |
|
|
305.8 |
|
|
|
10 |
|
| In-process research and development(i) |
|
|
6,048.1 |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
| Total |
|
$ |
12,990.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
(i) |
Acquired IPR&D assets are initially recognized at fair value and are classified as indefinite-lived assets until the successful completion or abandonment of the associated research and development efforts.
Accordingly, during the development period after the date of the Salix Acquisition, these assets will not be amortized into earnings; instead these assets will be subject to periodic impairment testing. Upon successful completion of the
development process for an acquired IPR&D project, a determination as to the useful life of the asset will be made; at that point in time, the asset would then be considered a finite-lived intangible asset and amortization of the asset into
earnings would commence, and the impact on earnings can be significant. If an IPR&D project were not successfully developed, an impairment charge may result, and such charge could be material. |
| |
A key variable in determining the fair value of IPR&D includes the application of probability factors related to the likelihood of success of the respective products reaching each remaining stage of clinical and
regulatory development, including market commercialization. The fair value of IPR&D is supported by industry and academic research papers that calculate probabilities of success by phase of development and by Valeant’s management view on
regulatory risks for its IPR&D. Changes in these probability factors may have a significant impact on the asset values. |
| |
IPR&D related to the Salix Acquisition is primarily comprised of product candidates in the approval stage, Phase 3 and Phase 2 of clinical trials. The most significant IPR&D project relates to a rifaximin
compound for use for the treatment of irritable bowel syndrome with diarrhea (“IBS-D”). The U.S. Food and Drug Administration (“FDA”) has accepted the supplemental New Drug Application for rifaximin IBS-D and a PDUFA action date
of May 27, 2015 has been set. In addition to the IBS-D indication, the rifaximin compound is also under development to treat Crohn’s disease and to prevent complications in early chronic decompensated liver disease. A further compound,
methylnaltrexone bromide, is in Phase 3 clinical trials and will be used as an oral treatment for opioid-induced constipation in patients with chronic non-cancer pain. |
| |
An upward or downward adjustment of 10% of the preliminary probability of FDA approval of each of the IPR&D assets will result in a fair value increase or decrease of the total IPR&D assets of approximately $1.1
billion. Such change would increase or decrease the deferred tax liability by approximately $0.4 billion and decrease or increase goodwill by approximately $0.7 billion. Valeant believes that an upward or downward adjustment of as much as
approximately 20% of the preliminary fair value estimate of the total intangible assets, or approximately $2.6 billion, is reasonably possible. A fair value increase or decrease of this magnitude would increase or decrease the deferred tax liability
by approximately $0.9 billion and decrease or increase goodwill by approximately $1.7 billion. Such change would result in an increase or decrease of approximately $87.0 million in annual amortization expense. |
| (f) |
Includes an estimated fair value of $1,082.2 million to record the warrant transactions that were entered into by Salix in connection with its 1.5% Convertible Senior Notes due 2019. |
| (g) |
Reflects the fair value of Salix’s debt as of the acquisition date as follows: |
|
|
|
|
|
| (In millions) |
|
|
|
| 1.5% Convertible Senior Notes due 2019 |
|
$ |
1,839.4 |
|
| 2.75% Convertible Senior Notes due 2015 |
|
|
1,286.2 |
|
|
|
|
|
|
| Total |
|
$ |
3,125.6 |
|
|
|
|
|
|
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS—(Continued)
| (h) |
Represents the net deferred income tax liabilities based on the statutory tax rates of the relevant jurisdictions. The effect of deferred taxes was estimated as follows: |
|
|
|
|
|
| (In millions) |
|
|
|
| Deferred income tax impact due to: |
|
|
|
|
| Estimated fair value adjustment for inventory |
|
$ |
(37.0 |
) |
| Estimated fair value adjustment for other assets |
|
|
20.0 |
|
| Estimated fair value adjustment for intangible assets |
|
|
(4,088.7 |
) |
| Estimated fair value adjustment related to debt |
|
|
77.5 |
|
|
|
|
|
|
| Estimated adjustments to deferred income taxes |
|
|
(4,028.2 |
) |
| Salix’s historical deferred tax liabilities, net |
|
|
(76.8 |
) |
|
|
|
|
|
| Estimated deferred income tax liabilities, net |
|
$ |
(4,105.0 |
) |
|
|
|
|
|
| Consists of: |
|
|
|
|
| Deferred income tax assets—current |
|
$ |
268.2 |
|
| Deferred income tax liabilities—non-current |
|
|
(4,373.2 |
) |
|
|
|
|
|
| Estimated deferred income tax liabilities, net |
|
$ |
(4,105.0 |
) |
|
|
|
|
|
| |
For purposes of these unaudited pro forma condensed combined financial statements, no adjustment has been made to the balance of unrecognized tax benefits, which is based on Valeant’s preliminary assessment and is
subject to change. The effective tax rate of the combined company could be significantly different than the statutory tax rates used for the purposes of preparing these pro forma condensed combined financial statements for a variety of factors,
including post-acquisition activities. |
| (i) |
Goodwill is calculated as the difference between the acquisition date fair value of the consideration transferred and the values assigned to the assets acquired and liabilities assumed. Goodwill is not amortized
and is not deductible for tax purposes. |
| 6. |
Pro Forma Adjustments in Connection with the Salix Acquisition |
This note should be read
in conjunction with Note 1. Description of Transaction; Note 2. Basis of Presentation; Note 4. Fair Value of Consideration Transferred in Connection with the Salix Acquisition; and Note 5. Assets Acquired and Liabilities
Assumed in Connection with the Salix Acquisition. The following summarizes the pro forma adjustments in connection with the Salix Acquisition to give effect to the acquisition as if it had occurred on January 1, 2014 for purposes of the pro
forma condensed combined statement of loss and on December 31, 2014 for purposes of the pro forma condensed combined balance sheet:
| |
(a) |
Certain reclassifications have been made to the historical financial statements of Salix to conform to the financial statement presentation adopted by Valeant, which include the following: |
Adjustments made to Salix’s historical consolidated statement of loss for the year ended December 31, 2014:
| |
1) |
Reclassification of transaction costs of $150.4 million from selling, general and administrative expense to acquisition-related costs; |
| |
2) |
Reclassification of milestone payments of $64.5 million related to Salix’s IPR&D intangible assets from research and development to in-process research and development impairments and other charges and
reclassification of a termination payment of $5.0 million from research and development to restructuring, integration and other costs; |
| |
3) |
Reclassification of intangible impairment charges of $162.3 million to amortization and impairments of finite-lived intangible assets; and |
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS—(Continued)
| |
4) |
Reclassification of interest income of $1.0 million from interest and other expense to interest income and reclassification of other expense of $3.7 million from interest and other expense to foreign exchange and other.
|
Adjustments made to Salix’s historical consolidated balance sheet as of December 31, 2014:
| |
1) |
Reclassification of reserve for product returns, rebates and patient-focused promotional programs of $206.4 million to accrued and other current liabilities and reclassification of reserve for chargebacks of $63.0
million to trade receivables, net, which resulted in a further reclassification of Salix’s trade receivables, net to accrued and other current liabilities; |
| |
2) |
Reclassification of the current portion of the Term Loan B credit facility and convertible senior notes of $981.1 million, in aggregate, to current portion of long-term debt; |
| |
3) |
Reclassification of the Term Loan B credit facility and 2021 senior notes of $1,830.0 million, in aggregate, to long-term debt; |
| |
4) |
Reclassification of other long-term liabilities of $15.9 million to liabilities for uncertain tax positions; and |
| |
5) |
Reclassification of lease incentive obligation of $9.1 million to other long-term liabilities. |
| (b) |
To reduce cost of goods sold by $22.5 million for milestone payments relating to approved products that were incurred by Salix for the year ended December 31, 2014. Salix’s accounting policy is to recognize
such milestone payment immediately in the statement of loss in the period when it is incurred whereas Valeant’s policy is to recognize such payment as part of the carrying value of the related finite-lived intangible asset and recognize
amortization expense over the useful life of the intangible asset. For purposes of these unaudited pro forma condensed combined financial statements, the corresponding adjustments to intangible assets and amortization expense have been omitted as
any such conforming adjustments to be made to Salix’s historical intangible assets and amortization expense would have been eliminated by the application of acquisition accounting (Note 6(c) and (i)). |
| (c) |
To adjust amortization of intangible assets as follows: |
|
|
|
|
|
| (In millions) |
|
Year Ended
December 31,
2014 |
|
| Reclass Salix’s historical intangible impairment charges to conform to the financial statement presentation adopted by Valeant
(Note 6(a)) |
|
$ |
162.3 |
|
| Eliminate Salix’s historical intangible asset amortization expense |
|
|
(216.1 |
) |
| Estimated amortization expense of acquired finite-lived intangibles: |
|
|
|
|
| Product rights (estimated to be $6,636.6 over a weighted average useful life of 12 years) |
|
|
559.1 |
|
| Corporate brand (estimated to be $305.8 over a weighted average useful life of 10 years) |
|
|
30.6 |
|
|
|
|
|
|
| Total(a) |
|
$ |
535.9 |
|
|
|
|
|
|
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS—(Continued)
| (a) |
For purposes of the unaudited pro forma condensed combined financial statements, the intangible impairment charges of $162.3 million recognized by Salix in its historical consolidated statement of loss for the year
ended December 31, 2014 have not been eliminated. |
| (d) |
To record the following debt-related adjustments: |
|
|
|
|
|
| (In millions) |
|
Year Ended
December 31,
2014 |
|
| Eliminate Salix’s historical interest expense related to debt that was repaid in connection with the Salix Acquisition(a) |
|
$ |
170.8 |
|
| Record interest expense on debt issued by Valeant in connection with the Salix Acquisition(b) |
|
|
(759.0 |
) |
| Record amortization of deferred financing costs and debt discount relating to the debt issued by Valeant in connection with the Salix
Acquisition(c) |
|
|
(29.3 |
) |
| Record amortization of additional debt discount and deferred financing fees in connection with amendment of Valeant’s existing
Credit Agreement(d) |
|
|
(13.1 |
) |
|
|
|
|
|
| Total |
|
$ |
(630.6 |
) |
|
|
|
|
|
| (a) |
To eliminate Salix’s historical interest expense as the associated debt would be repaid in connection with the Salix Acquisition. |
| (b) |
In connection with the Salix Acquisition, Valeant obtained $16.7 billion in financing through (i) a syndication of the incremental term loan facilities of approximately $5.15 billion under Valeant’s existing senior
credit facilities (the “Incremental Term Loan Facility”), (ii) the issuance of senior unsecured notes with an aggregate principal balance of approximately $10.1 billion, and (iii) the issuance of new equity of approximately $1.45 billion
prior to the closing of the Salix Acquisition. Details pertaining to the Incremental Term Loan Facility and the senior unsecured notes are as follows: |
| |
(i) |
The Incremental Term Loan Facility |
Concurrent with the closing of the Salix Acquisition,
Valeant incurred incremental term loan facilities in the aggregate principal amount of $5,150.0 million under its existing senior credit facilities. The Incremental Term Loan Facility consists of (1) a term loan A facility of $1,000.0 million
(“Term Loan A Facility”) and (2) a term loan B facility of $4,150.0 million (“Term Loan B Facility”)), and bears interest at a rate per annum equal to, at the election of Valeant, (a) with respect to the Term Loan A
Facility, (i) base rate plus a range between 0.75% and 1.25% or (ii) LIBO rate plus a range between 1.75% and 2.25%, in each case, depending on Valeant’s leverage ratio and (b) with respect to the Term Loan B Facility,
(i) the base rate plus a range between 2.00% and 2.25% or (ii) LIBO rate plus a range between 3.00% and 3.25%, depending on Valeant’s leverage ratio and subject to a 1.75% base rate floor and 0.75% LIBO rate floor, and having terms
that are consistent with the Valeant’s current term loan facility.
The Term Loan A Facility has a maturity of 5 years and will be
payable in equal quarterly amounts of (i) 5% per annum in the first year following the closing date, (ii) 10% per annum in the second year following the closing date and (iii) 20% per annum in each of the third, fourth
and fifth years following the closing date, with the remaining balance due at the maturity. The Term Loan B Facility has a maturity of 7 years and will be payable in equal quarterly amounts of 1% per annum with the remaining balance due upon
maturity. Valeant incurred approximately $5.3 million of deferred financing costs and approximately $79.3 million of debt issue discount, primarily consisting of original issue discount and financing fees paid to the lenders, in connection with the
Incremental Term Loan Facility, which will be amortized over the term of the loans. For purposes of the unaudited pro forma condensed combined financial statements, an interest rate of 2.41% and 4.00% has been assumed for the Term Loan A Facility
and the Term Loan B Facility, respectively, and the effective interest rate for the Incremental Term Loan is estimated to be 2.67% and 4.25% for the Term Loan A Facility and the Term Loan B Facility, respectively.
For purposes of the unaudited pro forma condensed combined financial statements, a 0.125 percent change in the margin of the Incremental Term
Loan Facility assumed above could result in an increase or decrease in interest expense of $6.4 million for the year ended December 31, 2014.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS—(Continued)
| |
(ii) |
The senior unsecured notes |
On March 27, 2015, Valeant completed its notes offering
of the U.S. dollar equivalent of approximately $10.1 billion aggregate principal amount of senior unsecured notes in the following four series denominated in U.S. dollars and euro:
5.375% Senior Notes due 2020 (“2020 Notes”)
The 2020 Notes, in the aggregate principal amount of $2,000.0 million, accrue interest at the rate of 5.375% per annum payable
semi-annually in arrears. The 2020 Notes have a maturity of 5 years. Approximately $22.5 million of financing fees, payable to lenders, were incurred by Valeant in connection with the 2020 Notes and are recognized as debt issue discount, which will
be amortized over the term of the notes. The effective rate of interest for the 2020 Notes is estimated to be 5.66%.
5.875% Senior Notes
due 2023 (“2023 Notes”)
The 2023 Notes, in the aggregate principal amount of $3,250.0 million, accrue interest at the rate of
5.875% per annum payable semi-annually in arrears. The 2023 Notes have a maturity of 8 years. Approximately $36.6 million of financing fees, payable to lenders, were incurred by Valeant in connection with the 2023 Notes and were recognized as
debt issue discount, which will be amortized over the term of the notes. The effective rate of interest for the 2023 Notes is estimated to be 6.07%.
4.50% Senior Notes due 2023 (“Euro Notes”)
The Euro Notes, in the aggregate principal amount of €1,500.0 million, accrue interest at the rate of 4.50% per annum payable
semi-annually in arrears. The Euro Notes have a maturity of 8 years. Approximately €16.9 million of financing fees, payable to lenders, were incurred by Valeant in connection with the Euro Notes and were recognized as debt issue discount,
which will be amortized over the term of the notes. The effective rate of interest for the Euro Notes is estimated to be 4.69%. For purposes of the unaudited pro forma condensed combined financial statements, the Euro Notes and the related debt
issue discount have been translated at a rate of USD 1.0731 to EUR 1.00, which is the foreign exchange rate as of March 31, 2015.
A
one percent change in Euro against U.S. dollar would increase or decrease the U.S. dollar equivalent of the Euro Notes by $16.1 million.
6.125% Senior Notes due 2025 (“2025 Notes”)
The 2025 Notes, in the aggregate principal amount of $3,250.0 million, accrue interest at the rate of 6.125% per annum payable
semi-annually in arrears. The 2025 Notes have a maturity of 10 years. Approximately $36.5 million of financing fees, payable to lenders, were incurred by Valeant in connection with the 2025 Notes and were recognized as debt issue discount, which
will be amortized over the term of the notes. The effective rate of interest for the 2025 Notes is estimated to be 6.29%.
Valeant incurred
approximately $11.0 million of deferred financing costs in connection with the issuance of the senior unsecured notes, which was recognized as other assets and will be amortized over the term of the respective notes.
As the senior unsecured notes bear interest at a fixed rate, a 0.125 percent change in interest rate would not have an impact on the interest
expense for the year ended December 31, 2014.
| (c) |
To record amortization of deferred financing costs and debt discount incurred by Valeant in connection with the issuance of approximately $15.3 billion debt financing for the Salix Acquisition. |
| (d) |
To record amortization of additional debt discount and deferred financing fees of $51.3 million incurred by Valeant as a result of the amendment to its existing Credit Agreement in connection with the Salix Acquisition.
The amendment is accounted for as modification in accordance with ASC 470-20, Modifications and Extinguishments, and the fee incurred by Valeant is treated as additional debt discount for the borrowings issued and deferred financing fees for
the revolving credit facility under its existing Credit Agreement and would be amortized over the remaining term of those borrowings. Of the $51.3 million incurred by Valeant, $9.4 million is attributable to the revolving credit facility.
|
| (e) |
To record an estimate of the deferred income tax impacts of the Salix Acquisition on the balance sheet and statements of loss, primarily related to the additional interest expense on incremental debt to finance the
Salix Acquisition and estimated fair value adjustments for identifiable intangible assets, and inventory (see Notes 6(b), (c), (d) and (f)). The tax effect related to additional interest expense on incremental debt to be incurred by Valeant and
amortization of intangible assets has been determined based on Valeant’s statutory tax rate of 26.5%. The effective tax rate of the combined company could be significantly different than the statutory tax rates assumed for purposes of preparing
these unaudited pro forma condensed combined financial statements for a variety of factors, including post-acquisition activities. |
| (f) |
To adjust acquired inventory to an estimate of fair value. The combined company’s cost of goods sold will reflect the increased valuation of Salix’s inventory as the acquired inventory is sold, which is
expected to occur within the first year post-acquisition. There is no continuing impact of the acquired inventory adjustment on the combined operating results, and as such, it is not included in the unaudited pro forma condensed combined statements
of loss. |
| (g) |
To reclass acquisition-related costs to conform to the financial statement presentation adopted by Valeant (see Note 6(a)) and to eliminate transaction costs of $1.9 million incurred by Salix in connection with the
Salix Acquisition. |
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS—(Continued)
| (h) |
To adjust prepaid expenses and other current assets as follows: |
|
|
|
|
|
| (In millions) |
|
|
|
| To record Salix’s capped call transactions and convertible bond hedge transactions at fair value |
|
$ |
1,266.9 |
|
| Eliminate Salix’s historical deferred financing costs related to its convertible senior notes |
|
|
(10.5 |
) |
| Settlement of Salix’s capped call transactions and convertible bond hedge transactions(a) |
|
|
(1,266.9 |
) |
|
|
|
|
|
| Total |
|
$ |
(10.5 |
) |
|
|
|
|
|
| (a) |
Salix’s capped call transactions and convertible bond hedge transactions were settled concurrently with the consummation of the Salix Acquisition pursuant to the respective agreements. |
| (i) |
To adjust identifiable intangible assets to an estimate of fair value as follows: |
|
|
|
|
|
| (In millions) |
|
|
|
| Eliminate Salix’s historical intangible assets |
|
$ |
(1,633.1 |
) |
| Fair value of acquired identifiable intangible assets |
|
|
12,990.5 |
|
|
|
|
|
|
| Total |
|
$ |
11,357.4 |
|
|
|
|
|
|
| (j) |
To adjust goodwill to an estimate of acquisition-date goodwill as follows: |
|
|
|
|
|
| (In millions) |
|
|
|
| Eliminate Salix’s historical goodwill |
|
$ |
(1,349.1 |
) |
| Estimated transaction goodwill |
|
|
6,983.3 |
|
|
|
|
|
|
| Total |
|
$ |
5,634.2 |
|
|
|
|
|
|
| (k) |
To adjust other long-term assets, net as follows: |
|
|
|
|
|
| (In millions) |
|
|
|
| Eliminate Salix’s historical deferred financing costs |
|
$ |
(55.4 |
) |
| To record deferred financing costs incurred by Valeant related to the debt issued in connection with the Salix Acquisition (Note
6(d)) |
|
|
16.3 |
|
| To record fee paid by Valeant, attributable to the revolving credit facility, in connection with the amendment of its Credit Agreement
(Note 6(d)) |
|
|
9.4 |
|
|
|
|
|
|
| Total |
|
$ |
(29.7 |
) |
|
|
|
|
|
(l) To adjust accrued and other current liabilities as follows:
|
|
|
|
|
| (In millions) |
|
|
|
| To reclassify Salix’s historical reserve for product returns, rebates, and patient-focused promotional programs to conform to the
financial statement presentation adopted by Valeant (Note 6(a)) |
|
$ |
206.4 |
|
| To reclassify Salix’s historical trade receivables, net of reserve for chargebacks (Note 6(a)) |
|
|
20.5 |
|
| To record Salix’s warrant transactions at fair value |
|
|
1,082.2 |
|
| Settlement of Salix’s warrant transactions(a) |
|
|
(1,082.2 |
) |
|
|
|
|
|
| Total |
|
$ |
226.9 |
|
|
|
|
|
|
| (a) |
Salix’s warrant transactions were settled concurrently with the consummation of the Salix Acquisition pursuant to the respective agreements. |
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS—(Continued)
| (m) |
To adjust long-term debt as follows: |
|
|
|
|
|
| (In millions) |
|
|
|
| Reclass Salix’s debt to conform to the financial statement presentation adopted by Valeant (Note 6(a)) |
|
$ |
2,811.1 |
|
| Adjust Salix’s existing debt to estimated fair value |
|
|
2,204.5 |
|
| Elimination of Salix’s Term Loan B Credit Facility(a) |
|
|
(1,140.0 |
) |
| Elimination of Salix’s 6.00% Senior Notes due 2021(a) |
|
|
(750.0 |
) |
| Repayment of Salix’s 1.5% Convertible Senior Notes due 2019 |
|
|
(1,839.4 |
) |
| Repayment of Salix’s 2.75% Convertible Senior Notes due 2015 |
|
|
(1,286.2 |
) |
| Record debt incurred by Valeant in connection with the Salix Acquisition(b) |
|
|
15,259.6 |
|
| Record debt discount related to the debt issued by Valeant(b) |
|
|
(193.0 |
) |
| Record additional debt discount incurred by Valeant in connection with the amendment of its existing Credit Agreement(c) |
|
|
(41.9 |
) |
|
|
|
|
|
| Total |
|
$ |
15,024.7 |
|
|
|
|
|
|
| (a) |
Salix’s Term Loan B Credit Facility and 6.00% Senior Notes due 2021 have been eliminated as they were repaid or discharged concurrently with the consummation of the Salix Acquisition. The repayment of Salix’s
Term Loan B Credit Facility has been reflected as part of the purchase consideration as the debt was repaid concurrently with the consummation of the Salix Acquisition and was not assumed by Valeant as part of the acquisition. Similarly, the
redemption of Salix’s 6.00% Senior Notes due 2021 has been reflected as part of the purchase consideration as the indenture governing the 6.00% Senior Notes due 2021 was satisfied and discharged concurrently with the consummation of the Salix
Acquisition and was not assumed by Valeant as part of the acquisition (Note 4). |
| (b) |
Valeant incurred approximately $15.3 billion of debt and approximately $193.0 million of debt discount, primarily consisting of original issue discount and financing fees, in connection with the Salix Acquisition (Note
6(d)). For purposes of the unaudited pro forma condensed combined financial statements, the Euro Notes and the related debt issue discount have been translated at a rate of USD 1.0731 to EUR 1.00, which is the foreign exchange rate as of
March 31, 2015. |
| (c) |
Valeant incurred approximately $51.3 million for the amendment of its existing Credit Agreement, as described in Note 6(d). Of the $51.3 million incurred by Valeant, $9.4 million is attributable to the revolving credit
facility, which is recorded in other assets (Note 6(k)). |
| (n) |
To adjust other long-term liabilities as follows: |
|
|
|
|
|
| (In millions) |
|
|
|
| Reclass Salix’s historical liabilities for uncertain tax positions to conform to financial statement presentation adopted by
Valeant (Note 6(a)) |
|
$ |
(15.9 |
) |
| Reclass Salix’s historical lease incentive obligation to conform to financial statement presentation adopted by Valeant (Note
6(a)) |
|
|
9.1 |
|
| Eliminate Salix’s lease incentive obligation to reflect a fair value of $nil |
|
|
(9.1 |
) |
|
|
|
|
|
| Total |
|
$ |
(15.9 |
) |
|
|
|
|
|
| (o) |
To adjust common shares as follows: |
|
|
|
|
|
| (In millions) |
|
| Eliminate Salix’s common shares |
|
$ |
(0.1 |
) |
| Estimated net proceeds from issuance of shares(a) |
|
|
1,431.8 |
|
|
|
|
|
|
| Total |
|
$ |
1,431.7 |
|
|
|
|
|
|
| (a) |
On March 27, 2015, Valeant completed the equity offering of 7,286,432 common shares, no par value, at a price of $199.00 per share, or aggregate gross proceeds of approximately $1.45 billion. In connection with the
issuance of these new common shares, Valeant incurred approximately $18.2 million of issuance costs, which has been reflected as reduction to the proceeds from the equity issuance. |
| (p) |
To eliminate Salix’s additional paid-in capital. |
| (q) |
To eliminate Salix’s accumulated other comprehensive loss. |
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS—(Continued)
| (r) |
To adjust cash and cash equivalents as follows: |
|
|
|
|
|
| (In millions) |
|
|
|
| Payment by Salix for transaction fees incurred and paid prior to Salix Acquisition (Note 5(a)) |
|
$ |
(100.5 |
) |
| Cash consideration for the Salix Acquisition (Note 4) |
|
|
(13,130.8 |
) |
| Cash consideration for Salix’s unvested restricted stock, which was accelerated as a result of the Salix Acquisition (Note
4) |
|
|
(164.5 |
) |
| Net proceeds from equity issuance (Note 6(o)) |
|
|
1,431.8 |
|
| Net proceeds from debt issuance(a) |
|
|
15,050.3 |
|
| Additional debt discount and deferred financing fees incurred by Valeant in connection with the amendment to its existing Credit
Agreement(b) |
|
|
(51.3 |
) |
| Repayment of Salix’s 1.5% Convertible Senior Notes due 2019(c) |
|
|
(1,839.4 |
) |
| Repayment of Salix’s 2.75% Convertible Senior Notes due 2015(c) |
|
|
(1,286.2 |
) |
| Settlement of Salix capped call transactions and convertible bond hedge transactions(c) |
|
|
1,266.9 |
|
| Settlement of Salix warrant transactions(c) |
|
|
(1,082.2 |
) |
| Payment for estimated acquisition-related costs(d) |
|
|
(80.0 |
) |
| Settlement of currency forward contracts(e) |
|
|
(27.0 |
) |
|
|
|
|
|
| Total |
|
$ |
(12.9 |
) |
|
|
|
|
|
| (a) |
Valeant incurred U.S. dollar equivalent of approximately $15.3 billion of debt and approximately $16.3 million of deferred financing costs and approximately $193.0 million of debt discount, primarily consisting of
original issue discount and financing fees, in connection with the Salix Acquisition (Note 6(d)). For purposes of the unaudited pro forma condensed combined financial statements, the Euro Notes and the related debt issue discount have been
translated at a rate of USD 1.0731 to EUR 1.00, which is the foreign exchange rate as of March 31, 2015. |
| (b) |
Valeant incurred approximately $51.3 million for the amendment of its existing Credit Agreement, as described in Note 6(d). |
| (c) |
For purposes of these unaudited pro forma condensed combined financial statements, Salix’s debt, capped call transactions, convertible bond hedge transactions and warrant transactions are assumed to be settled on
December 31, 2014. Valeant expects to repay Salix’s convertible senior notes and settle the capped call transactions, convertible bond hedge transactions and warrant transactions following the consummation of the Salix Acquisition and the
net payment is estimated to be approximately $2.9 billion. |
| (d) |
Valeant incurred approximately $80.0 million of acquisition-related costs in connection with the Salix Acquisition (including the commitment fee incurred by Valeant relating to the bridge loan facility) (Note 2).
|
| (e) |
Valeant entered into currency forward contracts to sell €1.50 billion and buy US Dollars in order to reduce its exposure to the variability in expected cash inflows attributable to the changes in foreign exchange
rates related to the Euro Notes. The forward contracts settled concurrently with the consummation of the Salix Acquisition and Valeant recognized a loss of $27.0 million. |
| (s) |
To adjust accumulated deficit as follows: |
|
|
|
|
|
| (In millions) |
|
|
|
| Eliminate Salix’s accumulated deficit |
|
$ |
355.5 |
|
| Expense related to Salix restricted stock that was accelerated in connection with the Salix Acquisition |
|
|
(164.5 |
) |
| Estimated acquisition-related costs incurred by Valeant in connection with the Salix Acquisition, net of tax of $19.0
million(a) |
|
|
(61.0 |
) |
| Loss on settlement of currency forward contracts(b) |
|
|
(27.0 |
) |
|
|
|
|
|
| Total |
|
$ |
103.0 |
|
|
|
|
|
|
| (a) |
Valeant incurred approximately $80.0 million of acquisition related costs (including the commitment fee incurred by Valeant relating to the bridge loan facility) (Note 2). The estimated acquisition-related costs have
not been reflected in the unaudited pro forma combined statement of loss as they do not have a continuing effect on the financial results of the combined company. |
| (b) |
Valeant entered into currency forward contracts to sell €1.50 billion and buy US Dollars in order to reduce its exposure to the variability in expected cash inflows attributable to the changes in foreign exchange
rates related to the Euro Notes. The forward contracts settled concurrently with the consummation of the Salix Acquisition and Valeant recognized a loss of $27.0 million. |
| (t) |
The unaudited pro forma combined basic and diluted earnings per share for the year ended December 31, 2014 have been adjusted by the shares issued by Valeant in the equity offering, which was completed on
March 27, 2015, as if they were issued on January 1, 2014. As a result of the offering of its commons shares, Valeant issued 7,286,432 of its common shares, no par value, at a price of $199.00 per share, or aggregate gross proceeds of
approximately $1.45 billion. In connection with the issuance of these new common shares, Valeant incurred approximately $18.2 million of issuance costs, which has been reflected as reduction to the gross proceeds from the equity issuance.
|
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