Salix Pharmaceuticals (SLXP) Gets Bid From Endo International
Shares of the Salix Pharmaceuticals Inc. (SLXP) closed up +10.96 or +6.95 percent to $168.61 per share in Wednesday's regular trading session. The company received a letter yesterday from the board of directors of Endo International Plc (ENDP) offering Salix $175 per share and trumping Valeant's (VRX) $158 per share bid.
Dublin, Ireland and Malvern, Pennsylvania based Endo International Plc is the result of a 1997 management buyout from DuPont Merck. At the time, three DuPont Merck executives bought all of Endo Laboratories LLC's generic line of products along with 12 other important pharmaceutical brands such as Percodan, Percocet and Opana. The company focuses on the development, manufacture and marketing of quality pharmaceutical products, generics and medical devices.
The letter sent to Salix's board by Rajiv De Silva, Endo's President and Chief Executive proposes the acquisition of all outstanding Salix common shares in exchange for 1.4607 shares of Endo common stock and $45 per share in cash at closing. Based on Endo stock's closing price on March 10th, the stock part of the consideration comes to $130 per common Salix share. With the additional $45 in cash at closing, the total per share value of the deal comes to $175 per Salix share.
Salix shareholders would wind up with approximately 40 percent of the combined company and would get one seat on the combined company's Board. The offer is an eleven percent premium over Valeant's $158 per share bid for the company.
Endo's bid, while higher than Valeant's, which is a straight cash deal, will require Salix shareholders to become Endo shareholders, while the Valeant deal gives Salix shareholders cash. The Endo bid would still need the approval of shareholders and the boards of both companies, while the Valeant all-cash deal would not require approvals.
In addition, Endo would have to pay out $356 million to Valeant as a breakup fee upon Endo's successful takeover and an additional $60 million in related fees. The additional cash outlay by Endo would dilute the company's stock and diminish the value of the stock Salix shareholders would ultimately receive.
Endo said that its offer "would provide Salix shareholders with a substantial premium and immediate cash value, as well as the opportunity to participate in the significant upside potential of a global leader in specialty pharmaceuticals with a highly diversified platform for future growth, through a material equity component."
Valeant is firm in its offer, stating that, "We are firmly committed to our all-cash agreed transaction, which delivers immediate and certain value to Salix shareholders". Paulson & Company, owner of nine percent of outstanding Salix stock expressed interest in the counteroffer saying that the stock component would give Salix shareholders a chance at further appreciation as well as a more favorable tax situation.
Salix shareholders seem undecided at the moment, as the stock opened down a fraction in this morning's premarket. Nevertheless, Salix stock gained almost seven percent in yesterday's regular session and the stock looks like it might test its all time high in the near term.
Other News About SLPX
Valeant Offers Lenders Yield Premium on $4.55 Billion Salix Loan
Company is offering lenders a yield premium to attract lenders for the $15 billion it needs to acquire Salix.
Dealpolitik: Did Salix Make a Strategic Blunder in Its Sale Process?
According to this WSJ article, Valeant is actually paying $17 less per share for Salix than a previous offer several months ago.
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