Valeant to Buy Medicis in $2.6B Deal

Valeant Pharmaceuticals International Inc agreed on Monday to buy Medicis Pharmaceutical Corp for $2.6 billion in cash, in a deal that will add Botox competitor Dysport and other skin care drugs to its portfolio.

The $44 per share offer is at a 39 percent premium to Medicis stock's closing price of $31.56 on Friday on the New York Stock Exchange.

Valeant, which is the largest publicly traded drug maker in Canada, has been on an acquisition spree since its 2010 takeover by Biovail Corp. Chief Executive Michael Pearson, a former McKinsey & Co director, prefers growth through acquisitions to heavily spending on research.

Valeant has been bulking up its skin care portfolio in the United States in recent months.

"Dermatology is clearly our most important business. We'll work on growing it ... we are quite excited about the future of the market in the United States," CEO Pearson told Reuters.

Pearson expects the dermatology business to contribute nearly half of Valeant's revenue once the deal closes. The U.S. dermatology business accounted for 27 percent of Valeant's total revenue for the three months ended June, up from 18 percent a year ago.

Valeant bought U.S.-based Pedinol Pharmacal Inc, which specializes in foot disorder treatments, in April and followed it up in May by acquiring some assets from University Medical, whose main brand is the over-the-counter acne treatment AcneFree.

Medicis, which has a market value of $1.89 billion, will add Solodyn, an acne treatment, and Dysport, an injection that rivals Allergan Inc's Botox, to Valeant's portfolio. Valeant already owns skin care products including cold sore treatment Zovirax, moisturizer and cleanser brand CeraVe and acne brands Acanya and Atralin.

Valeant said the deal, which is its biggest since a failed $5.7 billion bid to acquire specialty drugmaker Cephalon Inc last year, will immediately add to its earnings per share.

The deal, once completed, will generate more than $1.7 billion in pro forma revenue for the combined company's dermatology and aesthetics businesses within the United States this year.

The deal, expected to close in the first half of 2013, is likely to yield cost synergies at an annual rate of at least $225 million within six months of completion, the companies said.

The offer is at about 9 times earnings before interest, taxes, depreciation, and amortization (EBITDA), CEO Pearson said.

"If we exceed our synergies, which has been our track record, it will be less than 5 times EBITDA," he said.

Valeant, which has a market value of $15.58 billion, said it has secured committed financing for the deal from JPMorgan Chase Bank NA.

The combined company's commercial dermatology operations will be located in Scottsdale, Arizona and will operate under the name Medicis.

J.P. Morgan Securities LLC acted as Valeant's financial adviser. Deutsche Bank Securities Inc and Roberts Mitani LLC advised Medicis.


More deals are likely this year, albeit smaller in size, CEO Pearson said, adding that the company was looking at opportunities in Southeast Asia.

"If we can find the right opportunity at the right price we will continue to be very interested in growing in that part of the world," he said.

Valeant's Toronto-listed stock has soared from C$12.90 in 2008 to C$50.18 as of Friday close under Pearson's leadership. The company's revenue has more than tripled to $2.29 billion in 2011 from $741 million in 2008.