Merz swoops into Obagi deal with $385M bid, topping Valeant

These days, dermatology is the belle of the ball. Drugmakers have been wooing small players in the skin-treatment field, and just last month, Valeant Pharmaceuticals ($VRX) announced that it had agreed to buy Obagi Medical for $345 million.

But now, Merz Pharma has trumped that bid. Frankfurt-based Merz offered $22 per share for Obagi, topping Valeant's $19.75 bid. The Merz offer is worth about $385 million.

In Merz's letter to Obagi, the German company said it had been in "ongoing discussions" about a deal when Valeant swooped in with a bid. Merz says it didn't have the chance to put in a higher offer before the Valeant deal was announced. So, it's releasing this new bid publicly, to give Obagi shareholders the chance to decide.

"[T]hroughout this entire process we have preferred to work with you privately to consummate a transaction," Merz CEO Philip Burchard and VP Hans-Jörg Bergler wrote. "[W]e are now compelled to pursue a different approach … [and] believe that it is best to provide this letter to you and make it public at the same time."

Does Valeant come back with a higher bid, as Obagi shareholders seem to think? The company's stock rose past $22, to $22.79 per share, after Merz's bid was announced. Valeant itself isn't talking yet. But its CEO J. Michael Pearson is a notorious cheapskate, and dermatology is full of small companies ripe for consolidation.

Just consider the pace of dermatology-related deals in recent months. Novartis' ($NVS) generics unit, Sandoz, bought U.S.-based Fougera Pharmaceuticals last year for $1.5 billion, instantly becoming the biggest in the field. Then Valeant paid $2.6 billion for Medicis. In November, India's Sun Pharma nabbed DUSA Pharmaceuticals for about $230 million, and then Perrigo ($PRGO) spent $45 million to buy the 81.5% of Cobrek Pharmaceuticals that it didn't already own.

- see the Merz release