(RTTNews.com) – Botox maker Allergan Inc. is in advanced talks to buy Salix Pharmaceuticals Ltd. in order to fend off a $53 billion hostile bid from Canada-based Valeant Pharmaceuticals Inc., according to media reports on Monday. Shares of Salix gained more than 10 percent in extended trades following the media reports.
A deal could reportedly be announced later this week or in the next week. However, Raleigh, North Carolina-based Salix Pharma is itself merging with a unit of Italy’sCosmo Pharmaceuticals SpA as part of a tax-inversion deal. Tax inversion is the process of moving a company’s headquarters overseas to benefit from cheaper tax rates compared to higher tax rates in the U.S.
Irvine, California-based Allergan’s acquisition of Salix would likely halt a hostile bid for the company from Valeant Pharma and also mean the end of Salix’s deal to acquire Cosmo Technologies. Salix has a market capitalization of $10.18 billion.
In April, Valeant along with billionaire investor William Ackman’s hedge fund Pershing Square made a hostile bid to acquire Allergan for $46 billion in cash and stock. Pershing Square is the largest shareholder in Allergan with a 9.7 percent stake. However, Allergan’s board rejected the offer.
In May, Valeant sweetened its bid for Allergan to about $53 billion, but the offer was again spurned. Allergan has called Valeant’s business model unsustainable and said that a deal with Valeant would hurt its research and development program.
Allergan has agreed to unconditionally call and hold a special meeting of its shareholders on December 18. At the special meeting, Pershing Square plans to rejig the Allergan board and push forward the takeover bid.
Meanwhile, pharmaceutical company Actavis plc also reportedly made an offer to acquire Allergan. Terms of the deal were not known, but Allergan is said to have rejected the offer as it was focused on finalizing a deal with Salix.
Allergan could pay for the acquisition of Salix with cash and thus, sidestep the need for a shareholder vote on the deal with Valeant Pharmaceuticals and Pershing Square.