Valeant Pharmaceuticals Int (NYSE:VRX) (TSE:VRX) announced on Labor Day, a deal to acquire Medicis Pharmaceutical Corp (NYSE:MRX) in a $2.6 billion deal.
The Medicis shareholders would be paid $44 in cash per share held, marking a premium of 39% over the closing price of their stock on Friday.
Medicis Pharmaceutical Corp (NYSE:MRX) was the market leader in dermatology products in the U.S. in 2011, and Valeant ranked No 3. As a result, the merged entity would have a major share in the U.S. market. The deal is attractive to Valeant Pharmaceuticals Int (NYSE:VRX) (TSE:VRX), particularly because the two companies have complementary drug portfolios. Valeant Pharmaceuticals Int (NYSE:VRX) (TSE:VRX) had earlier acquired University Medicis Pharmaceutical Corp (NYSE:MRX), a skin care company, for $64 million. The company does not expect any regulatory conditions such as selling off any of its products, as reported by Bloomberg.
Valeant’s Chairman and Chief Executive Officer, J. Michael Pearson, said in a statement:
“The acquisition of Medicis represents a significant next step in our journey to become the leader in dermatology by strengthening Valeant’s presence in acne, actinic keratosis, aesthetic injectables and anti-virals, among others. Medicis’ highly complementary portfolio of leading branded products and promising pipeline is a solid strategic fit, and we look forward to leveraging Medicis’ well known and respected name in dermatology to drive long-term growth.”
Jonah Shacknai, Chairman and Chief Executive Officer of Medicis, said:
“Our Board of Directors believes this compelling all-cash transaction demonstrates the value our employees have created and the strength of our brand in the specialty pharmaceutical market. We look forward to combining our portfolio of products with Valeant, and we are confident that the combined portfolio under the Medicis name will be well positioned to capitalize on meaningful opportunities in the growing dermatology and aesthetics markets.”
The transaction is expected to be immediately accretive to Valeant’s cash earnings per share upon its closure. An annual cost savings of $225 million is expected to kick in within six months thereafter.
The transaction is the latest in a series of acquisitions that have placed Valeant on a blistering growth path. According to Dealbook, the company has already effected 11 deals this year. These include Natur Produkt International in Russia ($180 million) and the aforesaid acquisition of University Medical for $64 million.
Research from Morgan Stanley (NYSE:MS) places Valeant Pharmaceuticals Int (NYSE:VRX) (TSE:VRX) on an Overweight rating with an In-Line industry view. The acquisition looks “strategically and financially compelling”, as it would extend the company’s leadership in dermatology products. Morgan Stanley (NYSE:MS) estimates proforma EPS for 2013-2015 to be $5.58, $6.62, and $7.39 respectively.
Famous value investor Jeffery Uben’s ValueAct hedge fund is Valeant’s third largest shareholder. Additionally, Valent is the third largest holding in ValueAct’s portfolio.