Valeant acquires Obagi Medical Products

MONTREAL—Valeant Pharmaceuticals International, Inc. hasannounced the signing of a definitive agreement with Obagi Medical Products,Inc. under which Valeant will acquire all of Obagi's outstanding shares ofcommon stock for $19.75 per share in cash. The acquisition price represents a28-percent premium over the closing share price of Obagi's stock on March 19,the last trading day before the transaction was announced. The acquisition isexpected to close in the first half of this year, and Obagi's board ofdirectors has unanimously approved the transaction.

"Our Board of Directors has determined that this all-cashoffer is in the best interest of our stockholders and validates both the hardwork from our employees and our brand's unique leadership position within themarket. We look forward to being part of the Valeant family of companies,"Albert Hummel, president and CEO of Obagi, commented in a statement.

Per the terms of the definitive agreement, Valeant willcommence a tender offer for all of Obagi's outstanding shares at a price of$19.75, for an approximate total of $360 million. The tender offer isconditioned on a few provisions, including the tender of a majority of Obagi'sshares on a diluted basis, the receipt of necessary regulatory approvals andother customary closing conditions. Once the offer is completed, Obagi will bemerged with a wholly owned subsidiary of Valeant, and all outstanding sharesthat were not tendered to the offer will be converted into the right to receivethe same $19.75 per share in cash.

"The acquisition of Obagi will be a valuable supplement toValeant's current dermatology portfolio and will further build upon our growingaesthetics franchise," J. Michael Pearson, chairman and CEO of Valeant, said ina press release regarding the transaction. "Obagi is a leader in the physiciandispensed market and enjoys a strong brand perception among physicians. Theaddition of their products will not only strengthen and diversify our dispensedportfolio, but also expand our market presence with dermatologists and plasticsurgeons."

Once the transaction is complete, Valeant expects it to beimmediately accretive to its cash earnings per share. And while no details werereleased as to Valeant's plans for Obagi's employees or facilities, Valeantexpects to see cost synergies at an annual run rate of at least $40 millionwithin six months of the deal's close.

Obagi specializes in topical aesthetic and therapeuticskin-health systems, with dermatological brands such as Obagi Nu-Derm, Condition& Enhance, Obagi-C Rx, ELASTIDerm and CLENZIDerm. The company reportedtotal revenues of roughly $120 million last year.

The transaction is the second company acquisition forValeant so far this year. The company reported the acquisition of Natur ProduktInternational, JSC, a specialty pharmaceutical company based in Russia. Theacquisition total was approximately $163 million.