William Blair Says Cash Is King In Salix Bidding War

Valeant Pharmaceuticals Intl Inc VRX is likely to prevail over a newly emerged rival in its bid to acquire Salix Pharmaceuticals, Ltd. SLXP, an analyst said Thursday.

Endo International plc - Ordinary Shares ENDP offered Wednesday to top Valeant's earlier $10 billion all-cash agreement with a $11.2 billion deal that includes a substantial stock component.

"Cash likely remains king," William Blair's Tim Lugo, who also said the Endo offer is burdened by bad timing.

While the Valeant deal could close within weeks, Endo's bid is unlikely to get consummated before a key regulatory ruling on Salix's Xifaxan treatment for so-called traveler's diarrhea.

Related Link: Endo Bidding $170/Share For Salix

Possible complications in the drug's approval process aren't "a trivial risk," Lugo said, noting regulatory delays dating back to at least 2011.

The heavy stock component and implied regulatory risk in Endo's bid make it unlikely to prevail, according to Lugo.

But Valeant may be forced to sweeten its $158 a share offer for Salix, which changed hands recently at $170.36, up $1.75.

Endo offered to pay 1.406 of its shares and $45 in cash for Salix, for a value of about $175 a share.

Valeant traded recently nearly unchanged at $194, while Endo gained more than 3 percent to $90.73.