Talks aimed at achieving a multibillion dollar merger between Valeant Pharmaceuticals and Actavis have reportedly fallen through after an agreement could not be reached.
Neither company has commented on the situation, but a Wall Street Journal report citing sources close to the company has suggested that Canadian Valeant was looking to buy its smaller US competitor in a $13bn-plus deal.
Valeant has acquired several major assets and companies in recent years – most recently snapping up skincare specialist Obagi Medical Products in a $418m deal – but has made no secret of its desire to seek a mega-merger to catapult it into the big league.
The deal with Actavis would be by far the largest in its history, potentially creating a generic and speciality pharma giant with a market capitalisation in excess of $35bn and sales of almost $9.5bn a year.
The Canadian company’s CEO Michael Pearson told investors earlier this year that discussions with a number of companies were ongoing regarding a merger of equals and that the right deal would “create significant shareholder value”.
Actavis meanwhile is still dealing with the integration hurdles caused by its own recent merger, in which Watson Pharma took over Actavis for $5.6bn and rebranded itself under the latter’s banner last November. That deal followed a similar pattern to Biovail’s own acquisition of Valeant (and subsequent rebranding) in 2010.
Valeant is sitting on a pretty big pile of debt as a consequence of its serial acquisition strategy, at around $11bn, and while the company has said it would like to start paying some of that down, chief financial officer Howard Schiller stressed recently this would not get in the way of attractive M&A opportunities, especially while interest rates remain low.
Actavis is also carrying a fair amount of debt – something in excess of $6bn – but has indicated it wants to pay that down quickly. The Globe & Mail has suggested that one reason Valeant has been eyeing a deal with Actavis is that it would allow access to the more flexible US tax environment.