Canadian drugmaker Biovail Corp. and Valeant Pharmaceuticals International said Monday they are forming a new company under the Valeant name.
Combined, the companies had $1.65 billion in revenue in 2009. They say their size, financial strength and product lines will allow for significant growth, including a bigger presence in North America and other countries. Biovail of Toronto makes the antidepressant Wellbutrin XL and extended-release pain drug Ultram ER. Valeant, based in Aliso Viejo, Calif., sells treatments for chronic illnesses and generic drugs.
The deal completes a comeback of sorts for Biovail, which was tainted by scandal and saw its sales fall as its top-selling drugs, including Wellbutrin XL, faced competition from low-cost generics. In 2008, Biovail and several of its top executives were accused of manipulating the company's results to make its performance look better.
Biovail settled the allegations by making payments to the Securities and Exchange Commission in the U.S. and the Ontario Securities Commission in Canada. A case against three former Biovail executives, including founder and former Chairman and CEO Eugene Melnyk, is still in court.
Both companies' boards have approved the combination. Valeant shareholders will get a dividend of $16.77 and 1.7809 shares of Biovail when the deal closes. Biovail and Valeant will divide leadership of the company, which will be based in Mississauga, Ontario.
Biovail said the deal values its shares at a premium of 15 percent. U.S. shares of Biovail closed at $14.60 on Friday, while Valeant shares finished at $45.87. The company will keep Biovail's corporate structure, so the deal qualifies as a tax-free reorganization for Valeant.
The companies said Biovail shareholders will own 50.5 percent of the new company.
Valeant Chairman and CEO J. Michael Pearson will be the CEO of the new company, and Biovail CEO Bill Wells will be non-executive chairman. The board will consist of 11 people: five members of Biovail's board, five members of Valeant's board, and one other independent Canadian resident selected by Valeant with Biovail's agreement.
The new Valeant expects to pay a $1 special dividend by the end of 2010, after which it will no longer pay dividends.
The companies said they have secured a $2.8 billion loan from Goldman Sachs, Morgan Stanley, and Jefferies and Co. to help complete the deal.
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