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Outside bid for Santarus less likely

by Scott Stuart  |  Published December 4, 2013 at 2:15 PM

Salix Pharmaceuticals Ltd. filed the formal tender offer for its $2.6 billion acquisition of Santarus Inc. and the Santarus recommendation shows the company was reasonably shopped, making a rival bid unlikely.

Shares of Santarus had been trading over the $32 per share deal value last week.

The tender offer filed Tuesday has an initial expiration date of Dec. 31. The companies have said they anticipate a first quarter deal close.

The initial 15-day waiting period for the Hart-Scott-Rodino process with the Federal Trade Commission expires Dec. 9. Salix is acquiring diabetes and heartburn medications to fit with its gastrointestinal business. The merger includes a side agreement whereby Santarus will return all rights and data for Rifamycin SV MMX, a treatment for traveler's diarrhea, to Cosmo Technologies Ltd., its licensing partner for the drug. Salix has a Xifaxan (rifaximin) product indicated for travelers' diarrhea.

The companies do not think the merger needs antitrust approval outside the U.S.

The 14D9 Santarus' management support filing with the Securities and Exchange Commission reveals that in October as price talks between Salix and Santarus were evolving, Santarus' financial advisor Stifel, Nicolaus & Co., contacted potential strategic buyers and two private equity firms to test their interest. The parties contacted included large pharmaceutical companies and large specialty pharmaceutical companies with similar therapeutic focus on gastrointestinal, endocrinology or hereditary angioedema/orphan diseases, or had strategic talks with the Santarus in the past, among other criteria, according to the filing. Only one signed a confidentiality agreement but never made an offer.

The price discussion with Salix that resulted in the $32 cash deal did include efforts on the part of Santarus to include a contingent value right for its drug Ruconest, a treatment for hereditary angioedema in late stage development. Those potential bids included Santarus seeking as much as $34 per share, with $2 in a CVR tied to Ruconest.

With the tender offer filings, Santarus shares traded down from a premium of 25 cents at the end of last week to $31.95 at a spread of 5 cents.

Tags: CVR | Rifamycin SV MMX | Ruconest | Salix Pharmaceuticals Ltd. | Santarus Inc.

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Scott Stuart

Senior Writer: Arbitrage

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