Valeant Pharmaceuticals International Inc increased its takeover offer for Salix Pharmaceuticals Inc to $10.96 billion in cash on Monday, eliminating Endo International Plc, the only other bidder for the maker of gastrointestinal drugs.
Salix would be the largest purchase ever made by Canada-based Valeant, whose growth has long been fueled by acquisitions and cost-cutting. The acquisition would offer some redemption for dealmaking Valeant Chief Executive Michael Pearson, whose hostile bid for Allergan Inc (AGN.N) failed last year.
Even so, the deal would sharply raise Valeant’s debt, and it is buying a company that last year was forced to slash its full-year earnings forecast after supply levels for certain drugs were higher than earlier indicated.
The short bidding war for Salix pitted Valeant’s Pearson against his former protege, Endo Chief Executive Rajiv De Silva, a top executive at Valeant until 2012.
Salix shares rose 2 percent to $172.75 on the Nasdaq on Monday, while Valeant’s U.S.-listed shares gained 2.5 percent to $202.34.
Endo shares climbed 2.7 percent on the Nasdaq to $89.65.
Ireland-based Endo said in a statement that it was withdrawing its bid and has other potential deals and research and development on which to focus.
Endo offered last Wednesday to buy Salix in a deal worth about $175 per share in cash and stock. As of Friday’s close, Endo’s offer was worth $172.56 per share.
Valeant’s new offer provides Salix stockholders with about $1 billion more in cash, Valeant said. The deal was expected to close on April 1.
Valeant also announced a $1.45 billion share offering and said it would use the net proceeds, along with borrowed funds and cash on hand to fund the Salix purchase. A source close to the matter said Valeant would not issue more debt to fund the acquisition, according to IFR, a Thomson Reuters publication.
Valeant said its bid gives Salix an enterprise value of about $15.8 billion.