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(Reuters) - Valeant Pharmaceuticals International Inc (VRX.TO)(VRX.N) increased its offer for Salix Pharmaceuticals Inc SLXP.O to $10.96 billion in cash on Monday, eclipsing Endo International Plc (ENDP.O), the only other bidder.
The maker of gastrointestinal drugs has agreed to Valeant's new offer of $173 a share, up from a bid of $158 per share in cash made late last month, the two companies said in a joint statement.
Salix would be the largest purchase ever made by Canada-based Valeant, whose growth has been fueled by acquisitions and cost-cutting. The acquisition would offer solace for dealmaking Valeant Chief Executive Michael Pearson, whose hostile bid for Allergan Inc (AGN.N) failed last year.
It would also boost investor Bill Ackman, who announced last week he had bought a more than $3 billion stake in Valeant after having worked with the company on the Allergan bid.
Still, the deal would sharply raise Valeant's debt, and it is buying a company that last year was forced to slash its full-year earnings forecast.
The short bidding war for Salix pitted Valeant's Pearson against his former protege, Endo Chief Executive Rajiv De Silva.
Salix shares rose 2 percent to $172.75 on the Nasdaq on Monday, while Valeant's U.S.-listed shares gained 2.5 percent to $202.34.
Endo shares climbed 2.7 percent on the Nasdaq to $89.65.
Endo said in a statement it was withdrawing its bid and has other potential deals and research and development on which to focus.
Endo offered last Wednesday to buy Salix in a deal worth about $175 per share in cash and stock. As of Friday's close, Endo's offer was worth $172.56 per share.
Valeant's new offer provides Salix stockholders with about $1 billion more in cash, Valeant said. The deal was expected to close on April 1.
Valeant also announced a $1.45 billion share offering and said it would use the net proceeds, along with borrowed funds and cash on hand to fund the purchase. A source close to the matter said Valeant would not issue more debt to fund the acquisition, according to IFR, a Thomson Reuters publication.
Ackman plans to buy 3 million shares in the offering for about $600 million, the Financial Times reported, citing a person familiar with the situation. Ackman's stake in the company would rise to 6 percent from about 5 percent, the paper said.
Valeant said its bid gives Salix an enterprise value of about $15.8 billion.
Reporting by Ankur Banerjee in Bengaluru and Rod Nickel in Winnipeg, Manitoba, additional reporting by Natalie Harrison and Caroline Humer in New York and Anet Josline Pinto in Bengaluru; Editing by Savio D'Souza and Peter Galloway