Valeant Nears Deal to Buy Salix

By Liz Hoffman 

Valeant Pharmaceuticals International Inc. is nearing a deal to buy Salix Pharmaceuticals Ltd. for about $10 billion, in the latest sign the rapid pace of consolidation in the drug industry is set to continue.

Valeant would pay $158 a share in cash for Salix, in a deal that could be announced as soon as Sunday, people familiar with the matter said. That is just above the drug company's closing share price Friday of $157.85, following weeks of reports of the potential deal.

Bloomberg earlier reported that Valeant and Salix had reached a deal at $158 a share.

A transaction would represent a marriage of two companies that tried but failed last year to strike tie-ups amid a recent frenzy of deal making in the pharmaceutical sector. Many companies in the industry are seeking mergers that will help them become more efficient and keep up with rivals.

Valeant failed in a seven-month hostile effort to acquire Botox maker Allergan Inc., which eventually agreed to be bought by Actavis PLC for $66 billion.

When it was seeking to fend off Valeant, Allergan discussed an acquisition with Salix, though the talks never resulted in a deal. Actavis also considered acquiring Salix last summer, people familiar with the matter said at the time.

Salix, meanwhile, canceled its own planned acquisition of a unit of Italian drug maker Cosmo Pharmaceuticals SpA amid shareholder pushback and political pressure on such foreign tax-driven mergers, known as "inversions."

Salix in November disclosed a revision to its wholesale-inventory levels that suggested demand for its drugs, which treat irritable-bowel syndrome, liver problems and other rare diseases, might not be as high as previously thought.

The disclosure sent Salix's stock price tumbling and led the company to withdraw its earnings guidance for the year. It was followed by the departures of the company's chief executive and chief financial officer.

Salix acted quickly to clear out its drug backlog, a move many investors saw as a sign it may quickly re-enter talks to be bought by a rival.

Agreed drug-company mergers soared last year to $267 billion, more than double the 2013 level. The trend has shown signs of continuing, with Shire PLC last month agreeing to pay $5.2 billion for NPS Pharmaceuticals Inc.

Write to Liz Hoffman at [e-mail]

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