Valeant Agrees to Acquire Salix for $14.5 Bn
In a deal of specialty pharmaceutical companies, Valeant Pharmaceuticals International, Inc. and Salix Pharmaceuticals, Ltd. have entered into a definitive agreement under which Valeant will acquire all of the outstanding common stock of Salix for $158.00 per share in cash, or a total enterprise value of approximately $14.5 billion. The transaction was approved by the boards of directors of both companies.
Salix Pharmaceuticals is has a gastrointestinal product portfolio of 22 total products, including wprescription brands Xifaxan, Uceris, Relistor, and Apriso, as well as a strong near- term pipeline of new assets.
The combination is expected to yield greater than $500 million in annual cost savings from the cost base of the combined company. Synergies are expected to be achieved within six months of close, primarily from reductions in corporate overhead and R&D rationalization, with the cost to achieve these synergies to be approximately 65%. Valeant and Salix will determine how best to integrate the two companies to leverage the combined strengths of both while ensuring a smooth and orderly transition. Consistent with Valeant’s approach to integrating its previous acquisition of Bausch + Lomb, there are no planned reductions to Salix’s specialty sales forces or hospital, key account, and field reimbursement teams. The optimal size of the primary care sales force will be determined through the integration process.
On November 6, 2014, Salix reported five to nine month wholesaler inventory levels for its top four products. Valeant said it has conducted extensive due diligence on Salix’s stand-alone wholesaler inventory levels, stand-alone inventory work down plan, and associated potential litigation and regulatory exposure. Valeant expects to work down wholesale inventory and plans to target two months or less of wholesale inventory by year-end 2015. The net impact of the excess inventory on 2015 revenues is expected to be greater than $500 million. In January 2015, Salix Pharmaceuticals reported that it would restate its financials for the full year 2013 and the first three quarters of 2014 due to errors, which are primarily related to the timing for recognition of certain revenue, revenue-reducing returns and discounts, and expense items
The transaction, which is expected to close in the second quarter of 2015, is subject to customary closing conditions and regulatory approval.
The deal follows Valeant’s unsuccesful efforts to acquire the specialty pharmaceutical company, Allergan, in 2014, which Actavis agreed to acquire for approximately $66 billion.