Investors boost Cephalon past Valeant's $5.7B offer

Just nine months after a $4 billion merger with Biovail, Valeant Pharmaceuticals ($VRX) is looking to buy Cephalon ($CEPH) for $5.7 billion, or $73 per share. But investors were so jazzed by the possibility of a deal, they immediately pushed Cephalon's stock past the offer price, potentially complicating Valeant's bid.

The public offer comes after Valeant executives tried to negotiate a deal with Cephalon directly. But three letters to Cephalon management and directors yielded no fruit, so Valeant decided to take its bid to the shareholders. Valeant chief V. Michael Pearson said that, after a "close look at Cephalon's business," he believes "we put forward a very compelling offer" and that he intends to be disciplined about the price, Dow Jones reports.

But as Bloomberg notes, Cephalon stock jumped by more than 30 percent in early trading, to $77.25. The closing price on Tuesday, before Valeant announced its offer, was $58.75. Pearson expressed a take-it-or-leave-it attitude about Valeant's bid, saying the company could always put its capital elsewhere. "If [shareholders] don't like it, we will walk in a month," he told Bloomberg.

Dealmaking is Valeant's stock in trade, Jeffries & Co. analyst Corey Davis told the news service. And J.P. Morgan's Chris Schott told Reuters that this deal, besides adding Cephalon's drugs and pipeline to Valeant's stable, could offer $500 million in cost savings, once the companies are combined. "Valeant is an unusual company," Davis said. "They don't believe in R&D, which is kind of anti-pharma. They are ultra-aggressive in acquisitions." We'll see how aggressive--or disciplined--Valeant turns out to be this time.

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