Valeant Pharmaceuticals Int (USA) (NYSE:VRX) has entered into a deal with Medicis Pharmaceutical Corp(NYSE:MRX) to buy the dermatology products manufacturer for an all cash deal of $2.6 billion. The Montreal based Valeant has issued a statement that it will pay $44 per share which is a 39% premium on $31.87, Friday’s closing price. While the boards of both companies have agreed to the deal, it still needs the approval of Medicis shareholders as well as regulatory clearance. The deal is expected to be completed in early 2013.
This acquisition will help Valeant strengthen its position in dermatological products and in the words of Valeant Chairman and CEO J Michael Pearson, will be” a significant next step” for attaining the position of leader in the skin care segment.
Pearson prefers spending on acquisitions rather than on research and development, which he considers as a high risk activity. He has 50 acquisitions to his credit since he became CEO in 2008, out of which 15 happened this year. In late 2010, the company had combined with Biovail Corp., a competitor. The Medicis deal is the largest since that time.
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According to Pearson, "The attraction of this one is that this is squarely in the middle of dermatology where we already have a business. Their products are highly complementary to ours." He has also said, "It really fills in some holes that we had in our portfolio." With this acquisition, Valeant will add acne treatment products as well as aesthetic products such as those for smoothening wrinkles to its stable.
The dermatology operations of the combined companies will be based in Scottsdale and will bear the Medicis brand name. The companyies will carry on research and development operations in Canada, Arizona and California. Corporate support functions on the other hand, will be based in New Jersey.
Shares of VRX jumped 14.65% to $58.78 and made a new high at $59.99 and shares of mRX soared 38.31% to $43.65 and made a new 52-week high of $43.70.