Pharmaceutical Firms Biovail and Valeant Announce Merger
Valeant Pharmaceuticals International (VRX) and Canadian drugmaker Biovail (BVF) announced Monday they have agreed to merge. The combined company will keep the Valeant Pharmaceuticals International name, though it will be referred to as "the new Valeant." The agreement is structured so that upon completing the merger, which is expected before yea-end, Biovail stockholders will own approximately 50.5%, and Valeant holders will own approximately 49.5% of the shares of the combined company.
Biovail, which operates mainly in Canada and the U.S. (with a facility in Barbados) and had $820 million in revenue in 2009, markets such drugs as antidepressant Wellbutrin, herpes treatment Zovirax and extended-release pain drug Ultram. Aliso Viejo, Calif.-based Valeant operates also in Mexico, Brazil, Europe and Australia, and markets dermatology and neurological treatments, consumer products and generic drugs. It had $830.5 million in revenue in 2009.
"Valeant and Biovail believe the new Valeant's scale, financial strength and complementary product lines will enable it to pursue substantial growth opportunities," they said in a statement. The new Valeant expects to generate at least $175 million in annual cost synergies in the second year.
Under the terms of the agreement, Valeant stockholders will receive a one-time special cash dividend of $16.77 per share immediately prior to closing of the merger and 1.7809 shares of Biovail common stock upon its closing in exchange for each share of Valeant common stock they own.
Companies Expect Benefits to Emerge Quickly
According to the statement, the transaction represents a 15% premium based on a calculation of the stock prices over the last 10 trading days. But its total is valued at $42.77, below Valeant's Friday's closing price of $45.87. Also, the new company will pay by Dec. 31, 2010, an additional one-time $1-per-share dividend to all stockholders.
J. Michael Pearson, currently chairman and CEO of Valeant, will serve as the new Valeant's chief, residing in Barbados, and Bill Wells, currently CEO of Biovail, will be the nonexecutive chairman. But the company will remain headquartered in Mississauga, Ontario, and will continue to be a Canadian corporation listed on both the Toronto and New York Stock Exchanges.
The companies expect the merger will be cash EPS accretive within the first 12 months post-close. On a trailing 12-month basis as of March 31, 2010, the combined company would have had pro forma revenues of $1.75 billion and pro forma cash flow from operations of $575 million.
"This compelling combination will create tremendous value for stockholders of both companies as our business benefits from cost savings, greater scale, efficiencies from extending Biovail's corporate structure, and enhanced financial strength and flexibility," Pearson said in a statement.
Biovail shares jumped 7.5% in Monday's premarket trading, while Valeant shares were up 0.8%.