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Valeant’s Salix Acquisition Saga

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Salix: Valeant’s core business

With multiple acquisitions, Valeant Pharmaceuticals International (VRX) has grown from a company with $1.2 billion in annual revenue in 2008 to $10.4 billion in 2015. If you want to learn more about Valeant’s enormous growth, please read Valeant Pharmaceuticals: An Inorganic Growth Story.

Perhaps most of the interest in Salix was due to its portfolio of Xifaxan, its major drug, Ruconest, Apriso, Uceris, and Relistor. According to Valeant’s new classification of segments, Salix is part of its high-margin growth segment.

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The bidders for Salix

Salix manufactures drugs for gastrointestinal, one of the fastest growing areas of the specialty pharmaceutical industry. High-growth opportunities through Salix, Allergan (AGN), and Endo International (ENDP) were responsible for the race to steal Salix.

Allergan was the first company to show interest in Salix. But when Allergan found issues with Salix’s inventory, it lowered its earlier offer of $205 per Salix share to $175 per share. With the substantially lower-than-expected offer, Salix stopped further discussions with Allergan.

Endo had offered Salix $11.2 billion. It was rumored that Shire (SHPG) was also interested in Salix. However, Valeant won the deal by valuing Salix at $14.5 billion, inclusive of net debt. The acquisition deal happened in April 2015 when Valeant paid $158 per Salix share. In the next part of this series, we’ll try to understand what may have fueled Valeant’s interest in Salix.

To get exposure to high-risk Valeant and reduce the direct risk associated with it, you can invest in ETFs such as the VanEck Vectors Pharmaceutical ETF (PPH). PPH has 2.9% of its holdings in Valeant.

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