Valeant flexes its muscles on Cephalon deal

Valeant Pharmaceuticals is threatening to walk if it doesn't get backing from 50 percent of Cephalon investors by May 12. However, it also left itself a loophole; if shareholders elect enough of its nominees to make a majority on Cephalon's board, then its $5.7 billion buyout offer might just stay open.

Valeant also has enticingly dangled the possibility of a higher bid. If shareholders elect its nominees and Cephalon opens its books for due diligence--and that due diligence shows Cephalon's worth it--then Valeant might sweeten the offer "modestly." And if the newly constituted board wants to shop around for a better deal, Valeant says it won't stand in the way.

Given Valeant CEO Michael Pearson's previous comments, the new letter to Cephalon shareholders isn't much of a surprise. Pearson has said all along that he's not willing to hang around waiting for this deal. There are plenty of fish in the sea. He's also hinted that Valeant could lift its bid a little, provided Cephalon started cooperating. But this is the first time Valeant has set forth an actual deadline.

"THIS IS YOUR CHANCE TO RECEIVE AT LEAST $73 PER SHARE," the Valeant letter practically shouts, urging shareholders to send in their consent cards. While they're mulling the offer, Cephalon shareholders will also be voting for board members. We'll know May 10 whether they elect Valeant's nominees--and two days later whether they've voted for the deal.

- see the Valeant release
- get the Reuters news