Valeant Increases Hostile Bid for Ista As Target Talks to Other Bidders
Valeant (VRX) Pharmaceuticals International Inc., Canada’s biggest drugmaker, raised a takeover offer for Ista Pharmaceuticals Inc. (ISTA) as Ista said it was talking with unidentified possible bidders.
Ista Chairman Richard C. Williams and Chief Executive Officer Vicente Anido Jr. met Jan. 11 with Valeant CEO J. Michael Pearson, Ista said in a statement today. Valeant raised the offer during the meeting to $7.50 a share in cash from $6.50, and “set a target price of $8.50,” subject to due diligence, Ista said. Ista rose 13 percent to $8.22 at the close of trading.
Valeant made the initial $327 million bid public on Dec. 16, saying Irvine, California-based Ista had rebuffed three approaches. Ista, the maker of drugs for glaucoma and the pain of cataract surgery, rejected that offer, calling it “grossly inadequate,” and said it would explore strategic options.
“Our confidence level of having a deal completed is improving,” said Difei Yang, an analyst at Auriga Securities in New York, who said Ista may draw interest from large pharmaceutical companies seeking access to the eye-care market. “Ista, on a standalone basis, will be profitable this year, so it makes it a very nice tuck-in acquisition,” she said by telephone.
Ista in Talks
Ista is “currently is in dialogue with a number of parties that have expressed an interest in pursuing a strategic transaction,” the eye-care company said today. Ista didn’t identify any of the possible bidders.
The company is expected to generate 30 cents a share in adjusted earnings and $193.5 million in sales this year, according to the average estimates of four analysts surveyed by Bloomberg.
Valeant, in a statement today, reiterated its Jan. 31 deadline for reaching an agreement. At $7.50 a share, the deal would represent a 94 percent premium over Ista’s 60-day trading average as of Dec. 15, the day before Valeant made its offer public, the Mississauga, Ontario-based drugmaker said. At $8.50 a share, the premium would be 120 percent, the company said. The $327 million value of the initial bid includes debt.
“We do not understand why Ista would not have already pursued discussions with us and provided due diligence access,” said Pearson, Valeant’s CEO. “Our proposal represents an attractive premium to Ista’s trading performance, and we believe it offers a compelling opportunity for shareholders.”
Valeant Deadline
Valeant typically doesn’t let negotiations drag out and is likely to stick to the deadline, said Corey Davis, a Jefferies & Co. analyst in New York who covers the drugmaker.
“In my mind, there’s no other obvious buyer” and Ista’s relatively small revenue is unlikely to attract a larger drugmaker, Davis said by telephone. “If the board doesn’t accept by Jan. 31, I think the Ista stock price is in for a big surprise.”
Valeant rose 3.6 percent to $50.98. The drugmaker has climbed 46 percent in the past 12 months. Ista shares gained 33 percent in the last 12 months.
In a second statement today, Ista said it would give shareholders of record as of Jan. 27 the right to buy preferred stock.
“The rights plan was adopted to ensure the fair and equal treatment of the company’s stockholders in connection with any initiative to acquire effective control of the company,” Ista said. “It is intended to reduce the likelihood that any person or group would gain control of the company by open market accumulation or otherwise without paying a control premium for all common stock.”
Valeant sent Ista a letter yesterday confirming the increased proposal. The offer from Valeant “included a number of inaccuracies about Ista’s process and the discussions between the two companies,” Ista said. The U.S. company will review the new offer and is “fully committed to completing the strategic review,” according to the statement.
To contact the reporters on this story: Phil Serafino in Paris at pserafino@bloomberg.net; Alex Nussbaum in New York at anussbaum1@bloomberg.net
To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net; Reg Gale at rgale5@bloomberg.net
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