February 23, 2024

DealBook: Valeant Makes $5.7 Billion Hostile Bid for Cephalon

8:12 p.m. | Updated

Valeant Pharmaceuticals International offered to buy Cephalon for $5.7 billion in cash on Tuesday, kicking off a hostile bid for the biopharmaceutical company after weeks of discussions failed to produce a deal.

Under the terms of the offer, Valeant would pay $73 a share in cash, a 24 percent premium to Cephalon’s Tuesday closing price and a 29 percent premium to the company’s 30-day trading average.

Valeant also said that it would submit a proposal to replace Cephalon’s board with its own nominees.

J. Michael Pearson, Valeant’s chairman and chief executive, said in a telephone interview on Tuesday that his company is seeking to put its offer before Celaphon’s shareholders and let them decide. If the bid fails to garner much interest, Valeant will walk away, he said.

“We’re trying to be transparent with their shareholders,” Mr. Pearson said. “This is a really good way to find out whether shareholders would like to proceed or not.”

The hostile approach follows friendlier overtures by Valeant, a maker of a variety of neurology drugs and other treatments, for a deal. Valeant expressed interest in taking over Cephalon, which focuses on drugs that fight cancer and neurological disorders, as the latter company neared the expiration of several patents.

Cephalon’s board rejected those approaches each time.

On Friday, Valeant proposed an alternative to an outright takeover of Cephalon. Under the terms of the second plan, Valeant would pay $2.8 billion to buy Cephalon’s non-cancer businesses.

Mr. Pearson said that the alternative was devised to help jump-start possible negotiations, after having sit down with Cephalon’s chief executive, Kevin Buchi. The idea was to leave Cephalon with what it considered its core business.

But Mr. Buchi indicated this week that Cephalon’s directors would not be interested in a deal, prompting Valeant to make its offer public. One reason was that Valeant was unhappy with Cephalon’s announcing two deals to buy smaller drug makers, reducing its cash and making the target less attractive.

Cephalon said in a statement late on Thursday that it has received Valeant’s proposals and that its board is reviewing them.

Valeant said that its offer would be financed entirely with debt. As of the end of 2010, the company had about $3.5 billion in long-term debt.

Its adviser, Goldman Sachs, has said that the financing would be available, though it has not yet provided a formal commitment.

Cephalon is being advised by Deutsche Bank and the law firm Skadden, Arps, Slate, Meagher Flom.

Shares in Cephalon have fallen 19 percent in the last 12 months, closing on Tuesday at $58.75. Valeant’s stock has risen 5.4 percent over the same period, closing on Tuesday at $44.39.

Article source: http://feeds.nytimes.com/click.phdo?i=0fa942e2733b529f2461923d17d1cd27

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