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Valeant launches $327 million hostile bid for ISTA Pharmaceuticals
MISSISSAUGA, Ontario—Valeant Pharmaceuticals International Inc., in yet another step in its continuing buy-up spree, announced Dec. 16 that it had made a proposal to the board of directors of Irvine, Calif.-based ISTA Pharmaceuticals Inc. to acquire ISTA for $6.50 per share in cash. The proposed transaction has a total equity value of approximately $314 million on a fully diluted basis which, in addition to ISTA's net debt of approximately $13 million, brings the total enterprise value to approximately $327 million.
This proposed price, unanimously supported by Valeant's board, represents a premium of approximately 68 percent over ISTA's 60-day volume weighted trading average of $3.87 and a premium of approximately 67 percent over ISTA's closing price of $3.89 on Dec. 15, 2011.
ISTA's shares have seen a serious drop in the past seven months after sales of one of its key eye treatments for inflammation and pain suffered in the wake of Mylan Inc. launching a generic version of the drug.
Saying that it had been "preferring a consensual process," Valeant reports that it first approached ISTA on Oct. 5, 2011. After ISTA reportedly "refused to enter into a customary confidentiality agreement," Valeant made a formal written proposal to ISTA's management on Nov.r 23, 2011. ISTA responded to this letter on Dec. 2, 2011, stating that it needed more time to review Valeant's proposal. Valeant reaffirmed its proposal to ISTA on Dec. 12, 2011 in writing, and ISTA rejected that proposal two days later.
Valeant's chairman and CEO, J. Michael Pearson, says his company is "disappointed by ISTA's rejection of its proposal and ISTA's unwillingness to engage in discussions. "
"The proposed $6.50 per share price represents a meaningful premium to ISTA's recent trading performance, and we believe it represents a compelling opportunity for ISTA's shareholders in light of the continuing challenges facing ISTA," Pearson noted in a news release about the deal. "We would be willing to consider improving our offer price if we were allowed to conduct due diligence and found additional value. Given the importance of the proposed transaction to shareholders of both companies, we have decided to make our proposal public. We believe ISTA stockholders should not be denied the opportunity to determine for themselves whether their board and management should engage with Valeant in a meaningful and productive dialogue regarding our proposal. We have already devoted significant time and resources to pursing this potential transaction. Therefore, consistent with our past disciplined approach to acquisitions, our $6.50 offer will only remain in effect until Jan. 31, 2012. "
The response of ISTA's board of directors to Valeant's overtures, expressed via a letter sent by ISTA President and CEO Vicente Anido Jr., said that after careful deliberation, with the assistance of its financial and legal advisors, ISTA had determined on Dec. 13 that the non-binding proposal was "grossly inadequate and not in the best interests of ISTA shareholders."
ISTA further reports in its official statement to the hostile takeover move, "Due to the fact that Valeant has attempted to revive its previously rejected proposal, ISTA's Board announced that it will commence a review of all strategic options available to ISTA in the context of its fiduciary responsibilities and the Company's strategic plans."