February 13, 2015 / 12:07 AM / 3 years ago

Exclusive: Shire moves to prepare Salix bid - sources

A sign sits in front of Shire's manufacturing facility in Lexington, Massachusetts July 18, 2014. REUTERS/Brian Snyder

(Reuters) - British pharmaceutical company Shire Plc (SHP.L) has taken initial steps towards a bid for U.S. bowel drugmaker Salix Pharmaceuticals Inc SLXP.O and is working with advisers on a potential offer, according to people familiar with the matter.

    Shire is evaluating how to secure financing for a Salix bid, one of the sources said. The sources cautioned that Shire may still decide against a bid given the deal’s complexity. Salix is considering its options in the midst of a management shakeup and inventory issues, sources previously told Reuters.

    Valeant Pharmaceuticals International Inc (VRX.TO) has also been exploring an offer for Salix, the people added. It is not clear whether other companies are also preparing bids for Salix, which has a market capitalization of $9.2 billion.

    The sources asked not to be identified because the deliberations are confidential. Salix, Shire and Valeant declined to comment.

Last November, Salix announced that supply levels for its irritable bowel syndrome drug Xifaxan and other drugs were higher than it had previously indicated, forcing it to slash its full-year earnings forecast.

While Salix last month resolved an accounting problem related to its inventory issue, the company may still face other possible fines and litigation that could stymie a potential deal, the sources said. Shares fell 37 percent on the day the company disclosed its inventory issue.

Salix Chief Executive Carolyn Logan also stepped down last month following the departure of other top executives.

The company said in late January it would restate financial statements for all of 2013 and the first three quarters of 2014.

Shire has made several acquisitions to bolster its focus on rare diseases, including a $5.2 billion acquisition of NPS Pharmaceuticals in January and a $4.2 billion acquisition of ViroPharma last year.

Rare diseases remain an attractive area of focus for pharmaceutical companies because there are fewer hurdles to regulatory approval, marketing costs are lower and drug prices are higher than with mainstream drugs.

Jefferies analyst David Steinberg wrote in a December note to clients that a takeover of Salix by Shire would be a “strong fit,” because of the two companies’ complementary gastro-intestinal drug portfolios.

Reporting by Olivia Oran in New York; Editing by Bernard Orr

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