Valeant Pharmaceuticals (VRX) recently announced its intention to raise funds through the issuance of common shares.
Valeant will issue approximately 23.5 million shares for $85.00 per share and thereby raise approximately $2.0 billion.
In addition, the company has granted an option to the underwriters of the offering to purchase additional common shares equal to up to 15% of the common shares initially sold. This option can be exercised within a period of 30 days following the date of the prospectus supplement.
The offer is expected to close by Jun 24, 2013.
We note that Valeant is raising funds to finance its previously announced acquisition of Bausch + Lomb Holdings Incorporated.
Valeant is also offering $3.2 billion of senior unsecured notes due in 2021 and 2023, through its newly formed wholly-owned Canadian subsidiary, VPII Escrow Corp.
We remind investors that in May 2013, Valeant had announced that it will acquire eye-care company, Bausch + Lomb for $8.7 billion in cash.
Of the total consideration of $8.7 billion, Valeant will have to repay Bausch+Lomb outstanding debt of $4.2 billion while approximately $4.5 billion will be paid to the investor group, headed by Warburg Pincus, which acquired the latter in 2007.
Hence, Valeant intends to use the net proceeds from the current shares and notes offering to pay off Bausch + Lomb's outstanding debt.
We note that Valeant has been active on the acquisition front lately, thereby using its cash reserves.
The company had cash and equivalents of approximately $413.7 million on Mar 31, 2013, down 55% from $916.1 million on Dec 31, 2012.
A significant part of the cash balance has been used to fund recent acquisitions. In Apr 2013, Valeant acquired Obagi Medical Products for $440 million following a bidding war with Merz Pharma Group.
In Feb 2013, Valeant acquired Natur Produkt International for $137 million. In Dec 2012, Valeant acquired the entire outstanding common stock of Medicis Pharmaceutical Corporation for approximately $2.6 billion.
Given the scale of the Bausch + Lomb acquisition, we expect to see further fund generating activities by Valeant. We expect investor focus to remain on the Bausch+Lomb acquisition.
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