Debt-laden Valeant faces tough choices in asset sales
By Carl O'Donnell
NEW YORK (Reuters) - As Valeant Pharmaceuticals considers a multibillion-dollar auction to pare down $30 billion in debt, its challenge will be choosing which assets to sell without compromising any of its key businesses, analysts and investment bankers said.
Investors have lost confidence in the drugmaker's ability to grow profits after its pricing and distribution practices came under investigation by Congress and by federal prosecutors. Its market capitalization has plunged to $11 billion from nearly $90 billion, raising questions about how it can shoulder its substantial debt.
Key shareholders, including activist investor William Ackman, who joined Valeant's board last month, are trying to shore up its finances. The drugmaker is working with investment banks Goldman Sachs and Centerview to assist with potential divestitures, and provide other strategic guidance, Reuters reported on Thursday.
In the process, Valeant will need to ensure that it doesn't forfeit too much cash flow in selling key assets, which could leave its existing debt burden harder to bear.
As a result, the company is more likely to part with a handful of coveted drugs, possibly including gastrointestinal antibiotic Xifaxan, than carve out a major division for sale, according to analysts and investment bankers interviewed by Reuters.
Other assets that could go on the block include skin care products under its Obagi, Cerave and Solta brand lines, as well as toe fungus treatment Jublia, they said.
The company wants to stop short of selling off core divisions, such as Bausch + Lomb, Salix, and Medicis, that are fundamental to Valeant's strategy, they said.
Valeant did not immediately respond to requests for comment. Continued...