Valeant Pharmaceuticals (VRX) to Acquire Salix (SLXP), Reports 4Q, Full Year Results

Shares of the Valeant Pharmaceuticals International Inc. (VRX) were trading up +16.09 or +9.29 percent to $189.35 per share in Monday's premarket. The company announced on Sunday that it would be acquiring Salix Pharmaceuticals(SLXP) in a deal worth $14.5 billion. In addition, the Valeant reported its 2014 fourth quarter and full year results early this morning.

Valeant stock closed at $173.26 per share, up +4.13 or +2.44 percent in Friday's regular trading session.

Founded in 1960, Montreal, Canada based Valeant Pharmaceuticals International Inc. is a large pharmaceutical company which focuses on treatments for infectious diseases, dermatology and neurology. Valeant's portfolio of more than 500 products was developed from its previous research into radiochemicals and other substances. The company is known for manufacturing the antidepressant Wellbutrin XL, Efudex, Mestinon and Diastat as well as for over the counter medications and medical devices.

Raleigh, North Carolina based Salix Pharmaceuticals, Inc. is a pharmaceutical company specializing in gastrointestinal disorder medications. Salix produces a number of treatments such as  rifaxin, an antibiotic based on rifamycin, Pepcid (famotidine) for treating duodenal ulcers and gastroesophagal reflux disease or GERD and Metozolov ODT, an orally disintegrating tablet used in the treatment of refractory GERD, reflux that does not respond to conventional therapy.

The all-cash deal, which will be structured as a tender offer, will have Valeant pay Salix shareholders $158.00 per share and assume all of Salix's debt of $4.5 billion. Valeant will be financing the acquisition through the issue of bonds and loans from several banks, including HSBC and Deutsche Bank AG which will double the company's long term debt to $31 billion.

Valeant prevailed after a slew of companies expressed interest in acquiring Salix, including Actavis plc (ACT), Shire plc (SHPG), and Mylan Inc. (MYL). The deal for purchasing Salix was awarded to the highest bidder, with the process remaining competitive until the deal was reached over the weekend.

Valeant's Chairman and Chief Executive, J. Michael Pearson noted in the company's press release that, "Salix's market-leading gastrointestinal franchise is an ideal strategic fit for Valeant's diversified portfolio of specialty products. The growing GI market has attractive fundamentals, and Salix has a portfolio of terrific products that are outpacing the market in terms of volume growth and a promising near-term pipeline of innovative products."

Thomas W. D'Alonzo, Chairman of the Board and Acting Chief Executive Officer of Salix, said, "We are pleased to have reached an agreement with Valeant, which is a logical partner and importantly, creates immediate value for our shareholders. Combining Salix's leading market position in gastroenterology with Valeant's scale and resources will create a stronger and more diverse business committed to providing better health solutions to health care providers and their patients."

In addition to the Salix acquisition, Valeant reported its 2014 fourth quarter results: total revenue came to $2.3 billion, up +10 percent over the same period one year ago. GAAP earnings per share were $1.56 in the quarter with cash earnings per share of $2.58, an increase of 20 percent over last year's.

GAAP operating cash flow was +2.3 billion with adjusted operating cash flow of $2.5 billion. GAAP earnings per share increased to $2.67 with cash earnings per share of $8.34, a +34 percent increase over the same period last year. Valeant's guidance for its 2015 first quarter is for $2.30 per share with same store organic growth of +10 - +15 percent.

Investors are showing a positive reaction to both news items in this morning's premarket, with Valeant stock up sharply before the market opening. Salix stock closed just under the bid price in Friday's regular trading session and as of this writing, has not opened in this morning's premarket. Actions in both companies' shares are sure to be in the spotlight in today's trading session.

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Published on Feb 23, 2015
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

Copyrighted 2016. Content published with author's permission.

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