Valeant Pharmaceuticals International Inc., the reincarnation of the former Canadian drug powerhouse Biovail Corp., is attempting a hostile takeover of Cephalon, Inc., in a deal valued at approximately US$5.7-billion.
After failing to arrive at a friendly deal with Cephalon’s board, Valeant, the country’s largest drug manufacturer, said it will instead attempt to oust the board of directors of its target, replacing them with its own nominees.
“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 chief executive said in a statement. “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”
Valeant appealed directly to Cephalon’s shareholders with an offer of US$73 per share, a 29% premium over the company’s 30-day trading average. After closing the day at US$58.75, Cephalon’s shares spiked 24% in after-hours trading.
The company said the deal will be entirely debt financed. And Mr. Pearson appeared to preclude the possibility of enhancing the offer.
“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.”
Last September, Valeant went public with the merger of Biovail, the pharmaceutical firm once controlled by Ottawa Senators’ owner and racehorse enthusiast Eugene Melnyk. Mr. Melnyk has no further connections with the biotech firm.
Ever since, Valeant shares have been a top performer on the Toronto Stock Exchange. At Tuesday’s close of $43.30, Valeant is up 60% since its listing at $27.05 last Sept. 29 and up 53% in 2011 alone.
The hostile offer comes one day after Pennsylvania-based Cephalon offered to buy Australian company ChemGenex Pharmaceuticals Ltd. for about US$231-million.
The friendly all-cash bid represents more than a 50% percent premium to the recent price of ChemGenex shares and received the unanimous support of the board of directors of ChemGenex.
The Australian company is seeking FDA approval to sell the a specialized leukemia drug in the United States.
Last week, Cephalon won a patent fight over a pain medication used in cancer treatment.
The United States District Court in Delaware upheld the validity of Cephalon’s U.S. patent and found that Watson Pharmaceuticals Inc.’s proposed generic version of Fentora (fentanyl buccal tablet) infringed that patent.
The drug was approved by the U.S. Food and Drug Administration (FDA) in September 2006.
In its statement, Valeant said that Cephalon was not receptive to private acquisition talks.
“Valeant, preferring a consensual process, has made several private approaches to Cephalon’s management and board of directors, including three previous letters, which are also attached to this announcement, but has been disappointed by Cephalon’s unwillingness to engage in discussions in a timely manner.”
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