MONTREAL -- Valeant Pharmaceuticals shares jumped to an all-time high Monday in the first trading since the company announced the largest acquisition in its history, a US$10-billion friendly cash offer for Salix Pharmaceuticals.
On the Toronto Stock Exchange, Valeant's (TSX:VRX) shares peaked at C$252.60 early Monday before they gave up some gains to trade for $246.78, up $29.37 for the day.
Valeant is offering US$158 per share cash for the North Carolina-based company, which is focused on gastrointestinal products. Including Salix's debt and cash on hand, the deal is worth US$14.5 billion.
On the Nasdaq market, Salix shares were down US$1.84 at US$156.01.
Valeant CEO Michael Pearson says the Salix agreement, and an earlier deal set to close Monday for oncology drugmaker Dendreon, expands the type of potential targets the company will be seeking in future acquisitions in addition to dermatology and eyecare.
"We now have two new important therapeutic areas where we've really not paid a lot of time or attention to what are all the opportunities there," he told analysts during a conference call after reporting financial results that beat its prior guidance.
Salix and Dendreon are the first major deals since Valeant failed in its hostile bid last year for Botox maker Allergan, which was acquired by Actavis. Despite the failing to acquire Allergan, Valeant pocketed a net gain of US$287 million after selling its shares in Allergan.
It expects Salix will contribute modestly to Valeant's 2015 cash earnings per share, but projects a 20 per cent boost in 2016. The company is banking on the U.S. Food and Drug Administration granting approval for Xifaxan to treat irritable bowel syndrome with diarrhea.
Analysts said the Salix deal was positive for Valeant by adding another specialty area that will eventually boost earnings. But Douglas Miehm of RBC Capital Markets added it comes with heightened risk due to Salix's inventory mismanagement issues that he believes Valeant can overcome.
While focused on cutting debt that stood at US$15.3 billion at year-end, the company said it will continue to be on the lookout for small "tuck-in" deals.
"We're still able to do some important, albeit smaller transactions while we're delevering," said chief financial officer Howard Schiller.
Valeant expects to reap more than US$500 million in annual cost savings for the combined company, but wouldn't say how much will come from Salix.
Valeant's net income surged to US$534.9 million or $1.56 per diluted share in the fourth quarter, compared with US$123.8 million, or 36 cents per share, a year earlier. Revenue jumped 10 per cent to US$2.3 billion despite a negative foreign exchange impact of $113 million.
Excluding one-time items including $47 million in restructuring charges, it earned US$880.7 million or $2.58 per share, three cents above its prior guidance.
Organic sales increased 16 per cent during the quarter, exceeding its forecast of 12 per cent.
For the full year, it earned US$913.5 million or $2.67 per share, up from a loss of $866.1 million or $2.70 per share in 2013. Adjusted profits were $2.85 billion or $8.34 per share. Revenues increased 43 per cent to $8.26 billion.
