Endo is seeking to snatch Raleigh-based Salix away from Valeant Pharmaceuticals, which last month reached a deal to acquire the company for $158 a share in cash.
Endo’s offer is the latest sign of how attractive Salix has become in a pharmaceutical industry that is rapidly consolidating. A number of different suitors have been in in talks with Salix about acquiring the company over the past 9 months.
Endo, which is based in Ireland and has a U.S. headquarters in Malvern, Pa., released a statement Wednesday confirming its proposal shortly after the Wall Street Journal reported that an offer letter had been delivered to Salix’s board of directors.
Endo said that if Salix agrees to the terms of the deal, the transaction could close in the second quarter. The company is seeking to announce a definitive merger agreement with Salix within one week.
Trading of Salix and Endo shares were briefly halted Wednesday afternoon after the offer was announced. Salix shares closed up 7 percent, or $10.95, at $168.60. Endo stock fell less than 2 percent, or $1.24, to $87.76.
Salix shareholders would receive $45 in cash and 1.4607 shares of Endo stock for every share that they own, an 11 percent premium over Valeant’s offer. Salix shareholders would own 40 percent of the combined company.
Valeant defended its all-cash offer in a statement late Wednesday. “We are firmly committed to our all-cash agreed transaction, which delivers immediate and certain value to Salix shareholders,” a spokesman said.
If Endo’s offer is accepted, it would result in Salix having to pay a termination fee to Valeant and covering some of the company’s expenses. The terms of its sale to Valeant include a $356.4 million termination fee and the payment of out-of-pocket expenses of up to $50 million to Valeant.
Endo said in its offer letter that those costs could cause Salix to have a short-term cash problem, but Endo said it is willing to help pay the termination fee.
“Because of our strong financial position, Endo would be prepared to assist with liquidity needs related to paying the break fee,” Endo CEO Rajiv De Silva wrote in his letter to Salix’s board.
Salix officials agreed not to solicit rival acquisition offers after entering into their deal with Valeant last month. But Salix was allowed to provide information to and engage in discussions and negotiations with a third party that makes an unsolicited bid for the company.
Both Endo and Valeant have built their businesses over the past few years through a series of acquisitions. Endo, which has about 5,000 employees worldwide, has made six acquisitions since the beginning of 2013.
Last year, Endo moved its headquarters to Ireland after successfully completing a so-called corporate tax inversion that significantly lowered the company’s tax rate. Salix attempted to complete a similar move last year, but abandoned the effort in October after the U.S. Treasury Department made it more difficult for companies to complete corporate inversions.
Salix, which employs about 915 people, including more than 300 in Raleigh, sells drugs to treat gastrointestinal ailments. The company has a portfolio of 22 drugs. It reported annual revenue of $1.134 billion last year, compared to $914 million in 2013.