Valeant Pharmaceuticals International and Salix Pharmaceuticals, headquartered in Raleigh, N.C., have entered into a definitive agreement under which Valeant will acquire all of the outstanding common stock of Salix for $158 per share in cash, or a total enterprise value of approximately $14.5 billion. The transaction was approved by the boards of directors of both companies. 

Salix Pharmaceuticals is a widely recognized gastrointestinal market provider with a portfolio of 22 total products, including prescription brands Xifaxan, Uceris, Relistor and Apriso, as well as a strong near-term pipeline of innovative, new assets. 

"Salix's market-leading gastrointestinal franchise is an ideal strategic fit for Valeant's diversified portfolio of specialty products," said J. Michael Pearson, Valeant's chairman and CEO. "The growing GI market has attractive fundamentals, and Salix has a portfolio of terrific products that are outpacing the market in terms of volume growth and a promising near-term pipeline of innovative products. With strong brand recognition among specialist GI prescribers, a highly rated specialty sales force, and a significant product and commercial presence across the undertreated and underserved gastrointestinal market, this acquisition offers a compelling opportunity for Valeant to create a strong platform for growth and business development." 

Thomas W. D'Alonzo, chairman of the board and acting CEO of Salix, said, "We are pleased to have reached an agreement with Valeant, which is a logical partner and importantly, creates immediate value for our shareholders. Combining Salix's leading market position in gastroenterology with Valeant's scale and resources will create a stronger and more diverse business committed to providing better health solutions to health care providers and their patients."

The combination is expected to yield greater than $500 million in annual cost savings from the cost base of the combined company. Synergies are expected to be achieved within six months of close, primarily from reductions in corporate overhead and R&D rationalization, with the cost to achieve these synergies to be approximately 65%. Valeant and Salix will determine how best to integrate the two companies to leverage the combined strengths of both while ensuring a smooth and orderly transition. Consistent with Valeant's approach to integrating Bausch + Lomb, there are no planned reductions to Salix's specialty sales forces or hospital, key account and field reimbursement teams.

On Nov. 6, 2014, Salix reported five-to-nine-month wholesaler inventory levels for its top four products. Valeant has conducted extensive due diligence on Salix's standalone wholesaler inventory levels, standalone inventory work down plan and associated potential litigation and regulatory exposure. Valeant expects to work down wholesale inventory and plans to target two months or less of wholesale inventory by yearend 2015. The net impact of the excess inventory on 2015 revenues is expected to be greater than $500 million.

The transaction, which is expected to close in the second quarter of 2015, is subject to customary closing conditions and regulatory approval.