Valeant Buying Obagi for $344 Million


Montreal-based Valeant Pharmaceuticals is buying California-based specialty pharma company Obagi Medical Products for about $344 million, the companies announced today.

Valeant, which specializes in products designed for dermatology, neurology, and branded generics, has signed a definitive agreement to purchase all outstanding Obagi shares for $19.75 each, a 28% premium over the shares' closing price yesterday. The deal is expected to close before the end of Q2 2013. Regulatory approval is required. Valeant expects the deal to be immediately accretive to its cash earnings per share.

Obagi manufactures aesthetic and therapeutic skin-health systems under brand names such as Obagi Nu-Derm, Condition & Enhance, Obagi-C Rx, ELASTIDerm and CLENZIDerm, thus slotting nicely into Valeant's product portfolio. Obagi recorded $120 million in revenues last year, making for about a 2.9-times-sales valuation on Valeant's buyout.

Valeant's own shares sell for 6.2 times sales, however, suggesting the company is buying Obagi for a nice discount to its real value -- and as an added bonus, Obagi is already profitable, whereas Valeant is not.

Even as investors bid up shares of Obagi 28% in response to today's news (as of this writing), Valeant shares got a lift as well, rising 2.9% to trade at $73.51.


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