Canada's Valeant (VRX) to acquire Salix (SLXP) for $10.4 billion

  

Salix Pharmaceuticals, a maker of gastrointestinal drugs that has been courted by at least four potential suitors over the last year, has finally found a buyer.

Valeant Pharmaceuticals, the acquisitive Canadian pharmaceutical company, has agreed to pay $10.4 billion for Salix, or $158 a share in cash. Including debt, the transaction is valued at about $14.5 billion.

The deal is a turning point for both companies.

For Valeant, which spent the better part of last year unsuccessfully trying to acquire Allergan, the maker of Botox, the acquisition represents a return to form for the company and its chief executive, J. Michael Pearson.

Valeant is known as an aggressive buyer of smaller drug companies, and failing to secure Allergan, even with the help of the hedge fund billionaire William A. Ackman, was a rare defeat.

And for Salix, which has been courted by Allergan, Actavis and Shire in recent months, the sale to Valeant will put an end to constant deal speculation.

Salix’s share price has risen steadily as speculation of a deal intensified, jumping more than 50 percent in the last three months alone. Sales of the company’s more than 22 drugs, which include Xifaxan, Uceris, Relistor and Apriso, have been growing rapidly. Revenue for 2014 is expected to exceed $1.4 billion.

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But Salix, based in Raleigh, N.C., has also had trouble with overstocked inventory for its drugs in recent months. Valeant believes it can manage the issues once it owns the company.

By acquiring Salix, Valeant gains another set of products it can plug into its expanding sales pipeline. Valeant is known for acquiring products and expanding their sales, instead of spending billions on research and development in hopes of discovering lucrative new drugs.

Among the deals that have given Valeant a market value of more than $58 billion was the acquisition of Bausch & Lomb, the eye care company, in 2013 for about $8.7 billion.

This deal is an unusual turn of events for Valeant. Last year, as Valeant was pressuring Allergan to agree to a deal, Salix nearly played spoiler. Allergan almost acquired Salix late in the summer, a deal that would probably have made Allergan too expensive for Valeant.

Allergan never bough Salix, however, agreeing to sell itself to Actavis for $66 billion and leaving Valeant on the sidelines during a banner year for health care deal making.

Valeant’s deal for Salix came together a little more than three weeks ago, Mr. Pearson said, when he was approached by one of Salix’s bankers and informed that the company was up for sale.

Valeant executives and advisers then traveled to Raleigh and began negotiating the terms of a deal.

There was also competition. As recently as a week ago, Shire, a British drug maker, was seriously considering a takeover of Salix, according to people briefed on the matter.

But Shire has already made one multibillion-dollar deal this year, acquiring NPS in January. And it was only last year that Shire agreed to sell itself to AbbVie, an American pharmaceutical giant, only to see the deal fall apart after the Treasury Department changed the rules on overseas acquisitions.

SLXP and VRX on Mon 2/23/15, the day after the announcement