Valeant Pharma plans to raise bid for Salix

Canada's Valeant Pharmaceuticals International Inc is planning to raise its bid for Salix Pharmaceuticals Ltd, after Endo International Plc tabled a counter-bid this week, The New York Times today reported, citing unnamed people briefed on the matter.

Valeant is planning to team up with Pershing Square Capital Management and other top shareholders, including ValueAct Capital, to raise its bid to more than $160 a share in cash, the report said.

Valeant signed an agreement last month to buy Salix for $158 a share in cash, or about $10 billion, but Ireland-based specialty healthcare company Endo this week tabled a $175 a share or $11.2 billion cash and stock counter-bid. (See: Endo International tables $11.2 bn bid for Salix Pharmaceuticals)

Endo's offer is 1.4607 in shares and $45 in cash, works out to 75 per cent stock and 25 per cent cash.

Although Endo has tabled a superior bid, analysts opine that a sweetened offer by Valeant would be more lucrative for Salix shareholders since it is entirely in cash. Endo would also have to pay Valeant Pharmaceuticals a breakup fee of $356 million if its deal goes through.

Salix is yet to respond to Endo's offer, but said that it would review it with its advisers.

North Carolina-based Salix develops and markets prescription pharmaceutical products and medical devices for the prevention and treatment of gastrointestinal diseases.

Salix sells a hepatic encephalopathy drug called Xifaxan, which is expected to bring in annual sales revenue of over $1 billion if the US Food and Drug Administration approves it to treat diarrhea caused by irritable bowel syndrome.

Salix posted a loss of $414.9 million last year on revenues of $1.1 billion.

Endo, which has its headquarters in Dublin in Ireland and in Pennsylvania in the US, was founded in 1997 through a management buyout from DuPont Merck.

It develops and sells branded pharmaceutical, generic and device products.

The proposed bidding war is the latest in the about $60 billion in deals announced so far this year in the pharma and biotech industry as many companies aim to strengthen their portfolios as old drugs go generic.

Earlier Pfizer Inc had agreed to buy Hospira Inc for about $15 billion, and AbbVie Inc agreed to buy Pharmacyclics Inc for about $21 billion. (See: AbbVie to acquire onclology drugmaker Pharmacyclics for $21 bn)