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Valeant Raises Obagi Offer to $417 Million After Merz Bid

Valeant Pharmaceuticals International Inc. increased its offer to purchase Obagi Medical Products Inc. by 22 percent to about $417 million, countering a competing bid for the maker of prescription skin care products.

Obagi rose to its highest closing price on record, above Valeant’s new offer of $24 a share. The companies last month agreed to a deal of $19.75 a share. Obagi’s board unanimously supports the amended bid, Montreal-based Valeant said in a statement today.

Valeant’s move tops closely held Merz Pharma Group’s offer of $22 a share. The bid from Merz Pharma was unsolicited, Long Beach, California-based Obagi said after the proposal from the Frankfurt-based company was announced yesterday.

Obagi climbed 10 percent to $25.19 at the close in New York, its highest value since the shares began trading in December 2006. The price is higher than the new Valeant offer and indicates investors may expect an even sweeter bid. Obagi has increased 64 percent since March 19, the day before Valeant’s first offer was made public.

Obagi’s biggest product is Nu-Derm, an anti-aging treatment. The therapy had about $62 million in sales last year.

Valeant’s new offer will expire April 23 at midnight. Valeant shares declined 4.6 percent to $71.87 in New York.

Board Battles

Obagi’s investors have been pushing for a sale of the company, led partly by Voce Capital LLC, a hedge fund. In December, the fund’s managing partner J. Daniel Plants wrote the board and called for its replacement and a more thorough sale process than it said Obagi had previously conducted.

Voce took a 50,000-share stake in the company in 2011, and soon after began trying to persuade the board to sell the company. In February 2012, Obagi’s board, led by Chairman Albert Fitzgibbons III, a former private equity banker with Merrill Lynch Capital Partners, proposed a stockholder rights plan that would have made a hostile takeover more difficult. It was defeated by shareholders.

Since then, Voce and Obagi’s board have battled for control of the company. In December 2012, Voce proposed a full slate of new directors to replace the current board.

“You have but a de minimis economic stake in Obagi’s success and it appears to us that your paramount objective is perpetuating your control over the company at all costs,” Plants wrote. “The only way to fix Obagi -- indeed, to save it -- is with the replacement of the board with new, independent directors.”

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