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Merz Declines to Raise Bid for Obagi, Yielding to Valeant

Merz Pharma GmbH walked away from an effort to buy Obagi Medical Products Inc., saying it didn’t want to top Valeant Pharmaceuticals International Inc.’s $418 million offer.

Merz, a closely held German drugmaker, will look for other acquisition opportunities, the Frankfurt-based company said in a statement today. Obagi, a Long Beach, California-based maker of prescription skin-care products, declined to below the Valeant offer in U.S. trading, showing investors no longer expect a higher bid.

“Obagi was an opportunity worth pursuing given its complementary fit with Merz’s portfolio of injectables,” said Merz Chief Executive Officer Philip Burchard in the statement. “However, Merz is a disciplined buyer and at this level the economics of such a transaction do not meet our requirements.”

Valeant announced March 20 an agreement to buy Obagi for $19.75 a share in cash. Merz on April 2 made an unsolicited offer of $22 a share. Obagi the next day accepted a sweetened offer from Valeant of $24 a share, or about $418 million.

Obagi dropped 5.7 percent to $23.98 at 4 p.m. New York time. The stock has risen 76 percent this year and closed on April 4 at the highest price since the shares began trading in 2006. Valeant, based in Montreal, rose less than 1 percent to $72.12 in New York.

Obagi’s biggest product is Nu-Derm, a treatment to reduce signs of aging on the skin. The therapy had about $62 million in sales last year.

Voce Capital LLC, a hedge fund, last year began pushing for a sale of the company.

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