Valeant's offer for Salix is all cash, which may help it win over Endo.Thinkstock Images
Endo International PLC submitted a cash and stock offer for Salix Pharmaceuticals Ltd. worth $175 (U.S) a share, throwing a wrench into Valeant Pharmaceuticals International Inc.'s plans to take it over – but the competing offers are not apples to apples.
Valeant's $158 per share offer is all cash. Endo is offering only $45 in cash, with its stock making up the balance.
"Valeant probably has some room here and then some additional flexibility with their all-cash offer." said Neil Maruoka, analyst with Canaccord Genuity Inc. in a telephone conversation.
"We are firmly committed to our all-cash agreed transaction, which delivers immediate and certain value to Salix shareholders," said a Valeant spokesperson in an emailed statement.
Valeant spent much of 2014 trying to buy Allergan Inc. with the assistance of activist investor Bill Ackman. The pair were ultimately trumped by Actavis Plc which paid $66-billion for the asset, and outbid the Canadian firm and the New York billionaire to the tune of about $12-billion (U.S.).
Mr. Maruoka believes Valeant's wasted effort on Allergan will have no bearing on how it conducts itself in the fight for Salix.
"They [Valeant] prefer to avoid auctions but I think that they are going to remain disciplined regardless."
Endo CEO Rajiv De Silva's previous job was at Valeant under current CEO Michael Pearson. Mr. De Silva held the titles of president from 2010 to 2013, and as chief operating officer, specialty pharmaceuticals from 2009 to 2013.
Shares in Valeant, which had been trading higher before the news was made public on Wednesday afternoon, closed down almost four per cent.
Salix shares closed at $168.55 a share on the Nasdaq, a few bucks shy of Endo's offer.