Biovail to Merge With Valeant
June 21, 2010, 3:18 am
Biovail and Valeant Pharmaceuticals International said Monday that they had agreed to merge, creating a big new specialty drug maker with significant presences in Canada and the United States.
Upon completion, the combined company will retain the Valeant name, erasing the name of Biovail, one of Canada’s largest drug makers. The company had garnered negative press in recent years over charges of financial impropriety by former executives and a battle with a stock research firm and major hedge funds like SAC Capital.
Biovail settled the matter with the Securities and Exchange Commission two years ago for $10 million, though several former executives still face charges.
Under the terms of the deal, Valeant shareholders will receive 1.7809 Biovail shares for each of their Valeant shares, as well as a special cash dividend of $16.77 per share.
Going on Biovail’s closing share price of $14.60 on the NYSE before the announcement, the stock component comes to about $1.97 billion; and based on Valeant’s 75.69 million shares outstanding, the cash component amounts to $1.27 billion dollars — making that part of the deal worth about $3.2 billion.
By Dec. 31, the combined company is expected to pay out an additional $1-a-share dividend to both Valeant and Biovail shareholders.
At the deal’s closing, Biovail shareholders will own about 50.5 percent of the new company, while current Valeant shareholders will own about 49.5 percent. It will remain based in Mississauga, Ontario, with dual listings on the Toronto and New York stock exchanges.
Valeant’s chairman and chief executive, J. Michael Pearson, will hold the chief executive title at the new company, while Biovail’s chief executive, William M. Wells, will become nonexecutive chairman.
“With strong cash flows, substantial synergy opportunities and minimal patent risk, the new Valeant presents the opportunity to create shareholder value at a level that would not have been possible for either company on a stand-alone basis,” Mr. Wells said in a statement.
Biovail was advised by Morgan Stanley and the law firms Cravath, Swaine & Moore and Blake, Cassels & Graydon. Valeant was advised by Goldman Sachs, Jefferies & Company and the law firms Skadden, Arps, Slate, Meagher & Flom and Ogilvy Renault.
The companies said they had secured a loan facility of $2.8 billion from Goldman, Morgan Stanley and Jefferies.
The announcement is the latest, largest deal in Biovail’s yearslong campaign to expand its array of central nervous system treatments, which are one of Valeant’s lines, with its drugs for epilepsy, Parkinson’s disease and migraines.
In February, Biovail bought the rights to commercialize Alexza’s treatment for schizophrenic or bipolar agitation, and last year, it bought the rights to produce and sell Wellbutrin, GlaxoSmithKline’s antidepressant.
In March, Eugene Melnyk, the founder of Biovail who resigned under a cloud of securities fraud allegations in 2007, sold his 6.2 percent stake in the company, ending a long and contentious relationship between management and the company’s largest shareholder.
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