Valeant's low Salix price may leave room for other bids

Valeant ($VRX) may have inked a pact to buy Salix Pharmaceuticals ($SLXP) for more than $10 billion. But that doesn't necessarily mean rival bids aren't on the way.

The Canadian pharma's $158-per-share price doesn't measure up to what some analysts and investors predicted for Salix, considering the rumors that have been flying of interest from Shire ($SHPG), Endo ($ENDP) and others, Bloomberg reports. Sterne Agee's Shibani Malhotra, for one, predicted earlier this month that the GI specialist could cost a buyer upward of $170 a share--at least 7.6% more than what Valeant signed on to pay.

"It seems like Valeant worked very quickly to conclude their due diligence and decide whether to make a bid," Jefferies Group analyst David Steinberg told the news service. "It is lower than most would have expected. The question is, is that the high bid or will others come in?"

Valeant may have an upcoming FDA decision on lead drug Xifaxan to thank for its so-far-uncontested tie-up. Other suitors may have been waiting for regulators to make up their minds on a key irritable bowel syndrome indication for the drug--something that could happen as late as the end of May.

"Hard to envision how another bidder would come in at a much higher price," Pipar Jaffray analyst David Amsellem wrote in a note seen by Bloomberg. "The simple reality here is that we are still in front of an FDA decision."

But if the Quebec-based company is the one to ultimately walk away with Salix, it may have some problems looming, The Wall Street Journal notes. When the deal closes, Valeant's leverage will hit 5.6 times--a far cry from the leverage ratio of one time or less that many of its industry peers aim for. And that means the pharma may have to a) fund deals with equity, or b) put its serial dealmaking--on which it relies for its stock price climb--on hold.

- see the Bloomberg story
- get more from The Wall Street Journal (sub. req.)

Special Reports: Pharma's top 10 M&A deals of 2013 - Valeant/Bausch + Lomb - Salix/Santarus | The most influential people in biopharma today - J. Michael Pearson - Valeant