Endo's $11B bid tries to trump Valeant's offer for Salix

Endo International P.L.C., which has executive offices in Malvern, offered to pay more than $11 billion to acquire Salix Pharmaceuticals Ltd., seeking to upend a sale of the gastrointestinal-drug maker to Valeant Pharmaceuticals International Inc.

Endo's cash-and-stock proposal values Salix at $175 per share, according to a statement Wednesday. Valeant agreed last month to pay $158 a share in cash for Salix, whose Xifaxan for travelers' diarrhea is poised to receive additional approvals from the U.S. Food and Drug Administration.

The higher bid sets the stage for the latest takeover contest spurred by a promising drug, as pharmaceutical companies seek new avenues for growth. Valeant was thwarted last year in a long-running quest to buy Botox maker Allergan Inc., which agreed to be sold to Actavis P.L.C. for about $65 billion.

Shareholders are more likely to prefer Valeant's offer given that Endo's proposal is only about one-quarter cash, according to Alex Arfaei, an analyst at BMO Capital Markets. Valeant could also sweeten its proposal by offering its own shares as part of the deal, Arfaei said in a note to clients.

"We doubt that Valeant will lose Salix to Endo," Arfaei wrote.

Salix said it would review the offer. Its shares climbed almost 7 percent to $168.60 at the close in New York. Endo slipped about 1.4 percent, while Valeant dropped almost 4 percent.

"We are firmly committed to our all-cash agreed transaction, which delivers immediate and certain value to Salix shareholders," Valeant said in an e-mailed statement. The breakup fee in Valeant's deal to buy Salix is $356 million.

In its own statement, Paulson & Co. - Salix's largest shareholder, with a 9 percent stake - described the counterbid as "very compelling." It said Endo's offer provides "both more favorable tax treatment for Salix shareholders plus potential further appreciation from EPS accretion and strategic benefits."

Endo and Valeant follow similar strategies of acquiring smaller companies for their product lines, and cutting research and development spending. Endo chief executive officer Rajiv De Silva has said he prefers to focus on lower-cost, lower-risk drugs.

Endo, while run from Malvern, has been incorporated in Dublin, Ireland, since completing an acquisition that allowed it to transfer its official headquarters to pay less in U.S. corporate taxes. Valeant has a sizable presence in Bridgewater, N.J., though it is domiciled in Canada.

"Clearly, other inverted companies are pursuing the same M&A strategy as Valeant, and future deals will likely be more competitive," Arfaei wrote Wednesday.