Valeant Could Be Interested In Buying Salix; Sterne Agree Says This Makes Sense

Bloomberg reported that Valeant Pharmaceuticals International, Inc. VRX is allegedly interested in acquiring Salix Pharmaceuticals, Ltd. SLXP. Moreover, the report notes that Shire PLC (ADR) SHPG may also be interested in taking over Salix.

Although none of the involved companies’ representatives have commented on this rumor, Sterne Agree analysts did. They believe this report is in line with their view that “the affirmation of 2015 and 2016 guidance, near-term filing of reliable financials and the interim management team make Salix a potential acquisition target,” although they see that “management is considering all options and has initiated a search for a new CEO/CFO.”

Moreover, they think “the company’s earlier decision to accelerate destocking shifting the rebasing of normalized earnings forward to 2016 makes Salix attractive to potential acquirers in 2015,” the report states.

If the takeover were to occur, Sterne Agree believes that Salix could command a premium of up to 20 percent on its price target of $145 per share, “given the significant growth potential of Xifaxan if approved for the IBS-D indication an the synergy potential for GI and primary care focused players as well as tax advantaged players.”

Thus, the firm expects the transaction to take place (if it does) somewhere north of $170 per share.