Valeant nabs Medicis for $2.6 billion

Latest acquisition expands dermatology, aesthetic conditions portfolio

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MONTREAL—Valeant Pharmaceutical International, Inc. andMedicis Pharmaceutical Corporation have announced this week the establishmentof a definitive agreement by which Valeant will acquire all outstanding sharesof Medicis' common stock for $44 per share, for a total cash value ofapproximately $2.6 billion. The offer price represents a 39 percent premiumover Medicis' closing share price on August 31, the last trading day before thetransaction was announced, and a 31 percent premium over the company'sthree-month average trading price. The transaction has been unanimouslyapproved by both companies' boards of directors, and is expected to close inthe first half of next year.
"Our Board of Directors believes this compellingall-cash transaction demonstrates the value our employees have created and thestrength of our brand in the specialty pharmaceutical market," said JonahShacknai, chairman and CEO of Medicis, in a press release about the deal. "Welook forward to combining our portfolio of products with Valeant, and we areconfident that the combined portfolio under the Medicis name will be wellpositioned to capitalize on meaningful opportunities in the growing dermatologyand aesthetics markets."
Medicis was founded in 1988, with its corporate headquartersin Scottsdale, Ariz. The pharmaceutical company specializes mainly on productsfor the treatment of dermatological and aesthetic conditions. The company'sproduct portfolio includes brands such as Solodyn, Restylane, Ziana, Dysport,Perlane and Zyclara. The company has shown continued growth over recent years,posting revenues of approximately $571.9 million for full-year 2009,approximately $700 million for full-year 2010 and then approximately $721million for 2011. Medicis posted a gross profit margin of roughly 90.7 percentfor 2011, with a non-GAAP cash flow from continuing operations of roughly $218million. In a recent press release of the company's second quarter 2012financial results, Medicis reported revenues of roughly $197 million, placingabove its guidance of $185 million to $195 million. It is expected that thecombined company will see pro forma net revenue for 2012, for the combineddermatology and aesthetics businesses, of more than $1.7 billion in the UnitedStates.
"The acquisition of Medicis represents a significantnext step in our journey to become the leader in dermatology by strengtheningValeant's presence in acne, actinic keratosis, aesthetic injectables andantivirals, among others," J. Michael Pearson, CEO and chairman of Valeant,said in a press release. "Medicis' highly complementary portfolio of leadingbranded products and promising pipeline is a solid strategic fit, and we lookforward to leveraging Medicis' well known and respected name in dermatology todrive long-term growth."
Once the transaction is complete, Valeant expects it to beimmediately accretive to cash earnings per share, with forecasted costsynergies of at least $225 million annually within six months of the close ofthe deal. The combined company's commercial dermatology operations will bebased in Scottsdale, Ariz., under the name Medicis, a division of Valeant.Dermatology research and development operations will be based in Laval, QC;Scottsdale, Ariz.; and Petaluma, Calif., with corporate support functionsprimarily located in New Jersey.
Valeant brought on J.P. Morgan Securities LLC as itsexclusive financial advisor, and Sullivan & Cromwell LLP and Skadden, Arps,Meagher & Flom LLP as its legal counsel. Medicis brought on Deutsche BankSecurities Inc. and Roberts Mitani, LLC as financial advisors, and Weil,Gotshal & Manges LLP and Latham & Watkins LLP as legal counsel.

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