Valeant CEO Explains Why The Company Is Acquiring Salix For $10.1 Billion Cash Instead Of An Equity Offering

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Valeant Pharmaceuticals Intl Inc (NYSE: VRX) announced earlier today that it will be acquiring Salix Pharmaceuticals, Ltd. (NASDAQ: SLXP) in a $10.1 billion all-cash deal, which sent the former's shares soaring on the open.

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J. Michael Pearson, Valeant Pharmaceuticals CEO, was on CNBC following the announcement to discuss about the deal.

Appeal Of Salix, Regardless Of Deal Particulars

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“The GI [gastrointestinal] space is quite attractive,” Pearson said. “These guys [Salix] are clearly the market leaders.“The actual business is performing very well, if you look at the script trends and how the products are growing. And we got full visibility in the inventory issue when we did due diligence.”

Why Didn’t You Go For An Equity Offering Instead Of All Cash?

“One of the reasons that we went all cash is that was one of the things that Salix really wanted; it allowed us to move quickly, secure the business,” Pearson replied.“We can always do an equity offering later if we choose to. Our equity is there for our investors, and we don’t want to dilute our investors. And whatever returns we earn off this, we want that to get to our investors. And we are not a company that likes to issue equity.”

Is There A Concern That The SEC Might Come After Salix’s Inventory Issue?

“Well, it is a concern; it is something that may happen, and we have evaluated that as well. And we built it into our deal-model of potential downsides because of that,” Pearson replied. Pearson refuted the claim that Valeant was a “loser” in its bid to acquire Botox-maker Allergan, Inc. (NYSE: AGN), saying, “I don’t think we were a loser; I think we were disciplined and what we chose not to do is overpay for an asset.”