July 19, 2025

DealBook: Cephalon Rejects Valeant’s $5.7 Billion Takeover Bid

8:49 p.m. | Updated

Cephalon on Tuesday rejected an unsolicited $5.7 billion takeover bid by Valeant Pharmaceuticals International, arguing that the offer was too low and opportunistic.

Cephalon, which had already rebuffed several private merger approaches over recent months by Valeant, criticized the latest offer as more of the same.

Under the terms of its publicly disclosed bid, Valeant would pay $73 a share in cash. Valeant, a maker of a wide variety of drugs, argued in part that Cephalon faced several challenges that would be hard to surmount on its own. Among these is the expiration next year of a patent for Provigil, a treatment for narcolepsy and some other sleep disorders.

But Cephalon argued that the Valeant offer was pegged to its 52-week stock-price low, and failed to account for future growth from its pipeline of drugs.

“This is all about shareholder value,” Kevin Buchi, Cephalon’s chief executive, said in a statement. “The Cephalon board of directors is committed to maximizing value for our shareholders, and we take this responsibility very seriously.”

But Cephalon faces another potential challenge: Beyond offering cash, Valeant also plans to submit a proposal to replace Cephalon’s board with its own chosen directors.

Once Valeant delivers its proposal, shareholders will have 60 days from that day to vote on the plan.

Valeant announced its slate of nominees to Cephalon’s board on Tuesday, saying that its so-called consent solicitation would allow Cephalon’s shareholders to decide if they wanted to pursue a deal.

If Valeant succeeds in replacing Cephalon’s board, its nominees could remove impediments to a potential deal, including a poison-pill provision. Valeant dangled the prospect of a higher price if it were allowed to more closely examine Cephalon’s books.

“We stand ready to quickly commence and close our transaction as proposed, unless Cephalon stockholders do not support our offer, in which case we will focus our attention on other opportunities to invest our capital,” J. Michael Pearson, Valeant’s chairman and chief executive, said in a statement. “While we are disappointed with the response from Cephalon’s board, we remain committed to our process.”

Shares in Cephalon have risen more than 33.6 percent since the takeover proposal was disclosed, closing on Tuesday at $77.37. That is above the offer, suggesting that investors believe that Valeant or another bidder will make a higher bid.

Shares in Valeant rose 1.9 percent on Tuesday, closing at $53.96. Its shares have also risen since the company announced its offer, having jumped more than 20 percent.

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

Here is the list of Valeant’s nominees for Cephalon’s board:

  • Santo J. Costa, the former chief operating officer of Quintiles
  • Richard H. Koppes, the former general counsel and interim chief executive of Calpers
  • Lawrence N. Kugelman, the former chief executive of Coventry Health Care
  • Anders Lonner, the former chief executive of Meda
  • John H. McArthur, a former dean of the Harvard Business School
  • Thomas G. Plaskett, a director of Alcon and RadioShack
  • Blair H. Sheppard, the chairman and former chief executive of Duke Corporate Education and a former dean of Duke’s Fuqua School of Business

Article source: http://feeds.nytimes.com/click.phdo?i=9ab59b016c0f7c13f8bd583ddcedc6aa

DealBook: In Berkshire Resignation, Perception Matters

David L. SokolNati Harnik/Associated PressDavid L. Sokol

Perception is more important than reality.

After watching David L. Sokol on Thursday morning on CNBC as he tried to explain some potentially questionable trades he made in Lubrizol before Berkshire Hathaway bought the company, I was struck by what appeared to be a remarkable lack of appreciation for the way the public would perceive his actions.

Mr. Sokol clearly appeared to believe he had not done anything wrong or broken any rules when he bought shares of Lubrizol on Dec. 14, just a day after he instructed Citigroup to set up a meeting on behalf of Berkshire Hathaway to potentially orchestrate an acquisition of the company.

I have met Mr. Sokol before, found him to be an honest man and take his word that he thought he had acted completely appropriately.

But the facts paint an unattractive picture that creates a public perception problem — even if the reality of the situation is more innocent (I don’t know if it is or isn’t).

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At the time Mr. Sokol personally bought shares of Lubrizol, he had already begun trying to set in motion the gears of an acquisition by instructing Citigroup to put together a meeting with Lubrizol’s chief executive. Mr. Sokol, of course, had no way to know whether Lubrizol would engage in talks or whether Warren E. Buffett and Berkshire Hathaway’s board would be interested in acquiring the company.

But in the court of public opinion that doesn’t matter. His intent was to recommend the deal to Mr. Buffett. And even though he had no control over Mr. Buffett’s ultimate decision, he was one of a select few who were in a position to influence such a transaction.

Perhaps most striking, Mr. Sokol said on Thursday morning that if he could do it again, he would have bought shares of Lubrizol but not subsequently suggested that Mr. Buffett buy the company.

Putting aside the legality of the trade — and several lawyers I have spoken with believe the S.E.C. will scrutinize this matter seriously — the transactions demonstrate poor judgment.

Mr. Buffett once said: “Contemplating any business act, an employee should ask himself whether he would be willing to see it immediately described by an informed and critical reporter on the front page of his local paper, there to be read by his spouse, children and friends.”

That is a good rule to live by.

11:27 a.m. | Updated
After publishing my column, I received an e-mail asserting that Mr. Sokol “broke the spirit of the law,” and wondering how I could accept his defense. Let me clarify my point.

Do I believe that Mr. Sokol thought he hadn’t done anything wrong? Absolutely. Do I also believe that Mr. Sokol is naïve if he doesn’t understand how his trading could be problematic? Absolutely.

These two points are not mutually exclusive. If anything, the interview demonstrated that he did seem to understand the spirit of the rules.

Perhaps the most troubling part is that Mr. Sokol was out for himself, rather than for Berkshire. If he could have done it again, Mr. Sokol said he would have still bought shares in Lubrizol, but not recommended it as an acquisition target to Mr. Buffett — for which he said Berkshire would have been the loser.


Andrew Ross Sorkin is the editor of DealBook.

Article source: http://feeds.nytimes.com/click.phdo?i=0e224ca6942d00fecbe3fe15e39cdc19