Valeant Pharma Makes Hostile US$ 5.7 Billion Bid for U.S.-based Cephalon
From Canadian Press DataFile (March 29, 2011)
TORONTO _ Canada's largest publicly traded drug company is making a hostile US$5.7-billion cash bid for Cephalon Inc. (Nasdaq:CEPH), a Pennsylvania-based biopharmaceutical company that has been in the hunt for acquisitions of its own.
Valeant Pharmaceuticals International of Mississauga, Ont.,(TSX:VRX) is offering US$73 per share cash to Cephalon's shareholders. The bid comes one day after Cephalon announced a friendly offer to buy ChemGenex of Australia.
The Canadian company, formerly called Biovail until last year, says it's making the hostile bid after being rebuffed several times by Cephalon's board and management.
``We have taken a close look at Cephalon's business and believe we put forward a very compelling offer for Cephalon's stockholders," J. Michael Pearson, Valeant's chairman and chief executive, said in a statement after markets closed Tuesday.
Pearson was a major player in last year's merger of Biovail Corp., which had been repositioning itself, and Valeant, based in Aliso Viejo, Calif He had been chairman and CEO of Valeant and now heads the combined company, which retained its corporate headquarters near Toronto.
Valeant said Tuesday it had made several private approaches to Cephalon, including three letters, but said its management and board were unwilling to engage in discussions in a timely manner.
Cephalon researches and develops drugs to treat central nervous system disorders, pain, cancers and inflammatory disease. Valeant is increasingly focusing on neurology and dermatology drugs.
Cephalon, headquartered in Frazer, Pa., issued a statement late Tuesday saying Valeant had proposed on March 18 to buy the whole company for US$73 per share and on March 25 it offered to buy the whole company for the same amount or its non-oncology assets for $2.8 billion.
``Upon the receipt of each of Valeant's proposals, Cephalon acted expeditiously to commence an analysis of both alternatives presented by Valeant, Cephalon said.
``In addition, the company advised Valeant that its board of directors would be meeting to consider the proposals and planned to respond to Valeant during the week of April 4th."
Cephalon said its directors are ``very aware" of their responsibility to shareholders and intend to consider the unsolicited proposal from Valeant with a view to maximize shareholder value.
It said shareholders they don't need to take any action at this time in response the Valeant offer.
Cephalon shares ended regular trading on Nasdaq at US$58.75.
Valeant's offer was 24 per cent above that when it was announced but in after-hours trading Cephalon shares gained $6.39 to trade at US$65.14, cutting the premium to 12 per cent above market price.
Pearson said earlier Tuesday that Valeant is committed to finding ``additional value" if it's allowed to conduct due-diligence, which typically involves a close look at Cephalon's data _ including information that's not public.
``Given the importance of this transaction proposal to shareholders of both companies, and given that Cephalon's management continues to pursue strategies that in our view reduce the value of a merged entity, we have decided to make our proposal public," Pearson said.
``We believe this will enable the Cephalon stockholders to determine for themselves whether their board and management should engage with Valeant in a meaningful and productive dialogue regarding our proposal."
Valeant said it intends to solicit shareholder support to replace Cephalon's current nominees.
The company also acknowledged that it will borrow all of the money required to make the cash offer for Cephalon, and said New York investment firm Goldman Sachs & Co. has provided a highly confident letter for the full amount.
``To be clear, we intend to be disciplined on price as we believe we have submitted a full and fair offer for Cephalon based on the information available to us. If our offer does not have the requisite support of Cephalon's stockholders, we will focus our attention on other opportunities to invest our capital."
Valeant's shares closed regular trading in New York at US$44.39 and gained $4.76 in after-hours trading following the announcement. In Toronto, Valeant shares closed regular trading at C$43.30 _ near a 52-week high set on Friday.
Posted: March 2011