A deal that sees Canadian drug maker Biovail Corp. merge with California-based Valeant Pharmaceuticals International is "doomed to fail" under a huge debt load, Biovail founder Eugene Melnyk says.
Shareholders of the two companies approved the merger in separate votes earlier Monday. Biovail's shares which rose in the months ahead of the vote, were down 1.9 per cent at $27.32 on the Toronto Stock Exchange.
Biovail, Canada's largest publicly traded drug maker, said 99.9 percent of votes cast at the special meeting of shareholders in Toronto were in favour of the deal.
"At the end of the day, this is a tragedy and a travesty …," Melnyk told CBC.
Melnyk, who founded the company more than 20 years ago and saw it grow to a market capitalization of $7.5 billion US before jettisoning most of his shares earlier this year, is concerned about the huge amount of debt that was required to complete the deal.
Bloomberg News reported last week that the terms include a loan of between $950 million US and $1 billion due in 2015 and another loan totalling between $625 million and $675 million. Valeant is also seeking a $175 million revolving line of credit.
The total value of the merger is about $3.2 billion US.
"It is doomed to fail in two or three years," he said. "They won't be able to pay back the debt."
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