REFILE-Valeant deal survives Endo surprise

Fri Mar 13, 2015 3:17pm EDT
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By Mariana Santibanez, Robert Smith and Claire Ruckin

NEW YORK, March 13 (IFR) - Pharmaceuticals firm Endo stunned the market with a last-minute bid for Salix last Wednesday, but the surprise turn of events did little to dent demand for a multi-billion dollar junk bond issue backing rival Valeant's bid.

Orders for the Canadian pharmaceutical giant's bigger than expected US$10.1bn-equivalent deal - the second-largest junk bond offering in history - reached an impressive US$29bn, as investors piled into the deal despite the sudden uncertainty.

Valeant has built a global pharma empire by funnelling cash into acquisitions rather than research and development, with its Canadian headquarters giving it more flexibility to domicile its intellectual properties in tax havens such as Barbados.

Endo is very much trying to replicate this model, even going as far as hiring Valeant's former president to lead the company, albeit from an Irish domicile.

Valeant's US$10.1bn purchase of Salix looked a fait accompli, with the Canadian firm launching the jumbo bond alongside a US$4.15bn Term Loan B, until its Irish rival trumped it with a US$11bn bid slap-bang in the middle of the bookbuild.

Bankers on the deal were initially stunned, but were quick to assert that the debt financing would proceed as planned.

One banker on the deal pointed out that the proceeds of the issue would be held in escrow and the bonds were redeemable at par if the acquisition fell away, meaning Valeant would only have to pay interest costs if the deal went awry.   Continued...