Valeant Pharmaceuticals is reportedly planning to increase its offer to acquire Salix Pharmaceuticals after Endo International submitted a higher, counter offer of $175 per share in cash and stock.
Valeant offered to acquire all of the outstanding shares of Salix for $158 per share in cash. The company recently stated that it is committed to its all-cash agreed transaction with Salix, and pointed out that its offer delivers immediate and certain value for Salix shareholders.
A few years ago, crypto hedge funds were all the rage. As cryptocurrencies rose in value, hundreds of hedge funds specializing in digital assets launched to try and capitalize on investor demand. Some of these funds recorded double-digit gains in 2020 and 2021 as cryptocurrencies surged in value. However, this year, cryptocurrencies have been under Read More
Valeant to work with Pershing to raise offer above $160
According to the New York Times DealBook, Valeant intends to work with Bill Ackman’s Pershing Square Capital Management, ValueAct Capital and other large shareholders to increase its offer for Salix this weekend.
Pershing Square Capital Management recently disclosed that it owns 16,473,933 shares or 4.9% of Valeant. The stock is one of its big long positions and represents 16.9% of Pershing Square Holdings portfolio.
People familiar with Valeant’s plan said the company aims to increase its bid for Salix to more than $160 per share in cash. The exact amount of its new offer is still uncertain. The company is hoping that the increased offer would be sufficient to put an end to a bidding war.
The sources said Valeant is considering the issuance of new preferred equity to some of its shareholders including Pershing and ValueAct to raise cash to avoid taking more debt. The company does not want to take more debt to finance the increased offer because it does not want to hurt is credit rating according to the people.
Ackman said Valeant will not overpay for Salix
In a recent interview with CNBC, Ackman expressed his confidence on Valeant and its CEO Michael Pearson. According to him, he worked with Pearson for a year, and he knows him well.
“He’s the most disciplined buyer of companies. He’s not going to overpay for Salix, said Ackman.
In addition, Ackman commented that the shareholders of Salix would be concerned of getting so much Endo stock compared with the all-cash offer from Valeant.
“In order for them to take the Endo transaction they have to walk away from an all-cash deal. If you think Valeant is getting it on the cheap, then you should buy Valeant stock, which is what we did. We think Valeant stock is very cheap.”
Valeant could match and beat Endo’s offer
A number of analysts believe that Valeant could match and beat Endo’s offer for Salix. Jefferies analyst David Steinberg and his team commented that Endo’s $175 per share offer (composed of 25% cash and 75% in stock), “may not be as attractive” as the 100% cash offer from Valeant.
They also estimated that Valeant could match Endo’s bid, and it can still achieve 17% EPS accretion in 2016.
BMO Capital Markets analyst Alex Arfael believed that Valeant could acquire Salix at around $170 to $175 per share. He pointed out that it can outbid Endo not just because it can pay more cash, but it has also a lower tax rate. He suggested that Valeant’s higher offer may be composed of 90% cash and 10% stock.