Valeant Said to Be in Talks With Actavis on Merger

Valeant Pharmaceuticals International Inc. and Actavis Inc., two makers of generic drugs, have been in talks about a merger, people familiar with the matter said.

The discussions have been going on for some time, though it is unclear if the companies will reach an agreement, said one of the people, who declined to be identified because the negotiations are private. The Wall Street Journal reported yesterday that Valeant is seeking to acquire Actavis for more than $13 billion, citing people familiar with the matter.

Laurie Little, a spokeswoman for Montreal-based Valeant, declined to comment yesterday, saying the company doesn’t speak about “market rumors or speculation.” Charlie Mayr, a spokesman for Morristown, New Jersey-based Actavis, also declined to comment citing company policy not to speak about “rumors or speculation about business development activities.”

Talks have been fragile, according to the Wall Street Journal, and could break down. Executives from both sides are working to complete the deal after some of Actavis’s directors opposed it earlier this week, the newspaper said.

“A merger of Valeant and Actavis would create one of the biggest specialty drugmakers in the world,” said Raghuram Selvaraju, managing director and head of health-care equity research at Aegis Capital Corp. in New York, in a telephone interview yesterday. While Actavis’s product mix is better than a lot of the generic drug companies, the size of the deal may mean Valeant “would have to borrow prohibitively.”

Debt Load

Valeant had previously indicated it would lower its debt load after paying $2.6 billion last year to acquire Medicis Pharmaceutical Corp., he said. The company may be trying to do another deal while interest rates are low, he said.

“If interest rates spike they don’t have flexibility.” Selvaraju said. “Valeant has a limited window of opportunity.”

Actavis has gained 17 percent this year and closed yesterday at $100.94, its highest price since its stock began trading 20 years ago. Valeant has gained 22 percent this year. The stock declined less than 1 percent yesterday, closing at $73.16.

Valeant sells branded and generic drugs, including a variety of skin care products, and earlier this month bid $24 a share for Obagi Medical Products Inc., a maker of prescription skin cream products. The company’s bid topped a competing offer from Merz Pharma GmbH. Valeant yesterday said 85 percent of Obagi’s shares had been tendered and the purchase was completed.

17 Deals

Valeant has announced or completed 17 deals since January 2010, including its $2.6 billion purchase of Medicis Pharmaceutical Inc., a skin-care products company, in 2012, according to data compiled by Bloomberg.

The Montreal-based drugmaker’s 2011 hostile takeover of Cephalon Inc. was rejected by shareholders who later accepted a $6.2 billion bid from Teva Pharmaceutical Industries Ltd., the world’s largest maker of generic drugs. Valeant had sales of $3.5 billion in 2012 and a market value of $22.2 billion as of the close of trading yesterday.

Actavis, the biggest U.S. generic drugmaker, was formed last year when Parsippany, New Jersey-based Watson Pharmaceuticals bought Actavis Group hf for about $5.5 billion. The company changed its name in November to Actavis because the brand was more familiar worldwide, officials said at the time.

Actavis generated $5.9 billion in 2012 revenue and had a market value of $12.9 billion as of yesterday’s close, according to data compiled by Bloomberg.

Before it's here, it's on the Bloomberg Terminal.