Skip to main content

The Globe and Mail

Valeant claims victory in bidding war for Obagi

File photo of Valeant Pharmaceuticals International Inc. CEO Michael Pearson.


Valeant Pharmaceuticals International Inc.'s apparent victory in the bidding war for skin-care company Obagi Medical Products Inc. should strengthen its presence in the dermatology segment and open the door to further geographical expansion.

Montreal-based Valeant sweetened its offer for California-based Obagi Medical Products Inc. to $24 (U.S.) in cash per share from $$19.75 last week after its initial bid was trumped by an all-cash $22-per-share proposal from Merz Pharma Group.

Merz said on Monday it's withdrawing from the bidding war, saying it isn't comfortable pursuing the acquisition at these levels.

Story continues below advertisement

"Merz is a disciplined buyer and at this level the economics of such a transaction do not meet our requirements," chief executive officer Philip Burchard said in a news release.

Canaccord Genuity analyst Neil Maruoka says he'd be surprised to see another rival bid surface.

Obagi no doubt represented a choice opportunity for privately held German firm Merz to gain a foothold in the U.S. market, he said.

"But, with Valeant's dominant position in dermatology and its integration capabilities and ability to drive synergies, there was probably a view that they didn't have the same capacities to drive value," he said.

If the deal goes through for Valeant, it will be a "nice tuck-in for them. This represents all the characteristics they look for in a dermatology acquisition and presents opportunities outside the U.S., like Asia," said Mr. Maruoka.

Valeant, Canada's largest publicly traded drug company, unveiled its $343.8-million offer for Obagi last month. At the initial price of $19.75 per share, the bid represented a 28-per-cent premium to Obagi's closing price on Nasdaq on March 19.

At the revised $24-per-share price, the proposed transaction is valued at about $418-million.

Story continues below advertisement

Valeant said when it first announced its proposal that the merger would provide annual cost synergies of at least $40-million.

Formerly Biovail Corp., Valeant made more than a dozen acquisitions last year, including the $2.6-billion takeover of Medicis Pharmaceutical Corp. of Scottsdale, Ariz., a maker of skin-care products.

Obagi's biggest revenue generators are its Nu Derm anti-aging and acne treatment products.

Based in Long Beach, Calif., Obagi posted revenue of $120-million last year.

Report an error Licensing Options
About the Author
Quebec Business Correspondent

Bertrand has been covering Quebec business and finance since 2000. Before joining The Globe and Mail in 2000, he was the Toronto-based national business correspondent for Southam News. He has a B.A. from McGill University and a Bachelor of Applied Arts from Ryerson. More


The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

We’ve made some technical updates to our commenting software. If you are experiencing any issues posting comments, simply log out and log back in.

Discussion loading… ✨