Valeant Considers Selling Units To Investment Banks


Shares of Valeant are down over 80% in the past year due to an accounting scandal.

Valeant Pharmaceutical International Inc. (VRX.TO) has been working with investment banks to go over its options regarding the interest expressed by buyout firms and other companies in a number of its businesses.

Although Valeant has not yet decided to put any of its major businesses up for sale, the drug maker’s initiative to consult with banks seemed to be a good indication of its need to divest assets in order to strengthen its problematic finances, according to sources who wished to remain anonymous.

The sources further revealed that the Canadian pharmaceutical company sought the advice of Goldman Sachs Group Inc. (GS.S) and Centerview Partners Holdings LLC in an effort to evaluate strategic options with regards to doing business with its creditors.

While both the pharmaceutical company and the investment banks involved declined to comment on the matter, Valeant Chief Executive Officer Michael Pearson and board member William Ackman said that the company has already considered unloading some of its “non-core assets,” or the assets that are either not essential to or no longer used in business operations, in order to pay its 32 billion dollars of outstanding debt.

Bidders expressed their interest in Valeant’s businesses since it announced its openness to divest assets. One asset of interest was Xifaxin, the best-selling product of its gastrointestinal division, which Valeant acquired last year as part of its Salix Pharmaceuticals acquisition, the sources revealed.

The sources further said that other businesses which got inquiries from buyout firms include aesthetic products like Obagi and Solta, and skin care product, CeraVe.

Legg Mason Inc’s Bill Miller said he already bought Valeant shares, confident that the price of the drug maker could be doubled. In addition, Miller said that the company could unload some acquired assets for at least 80 percent of what it paid for them.

Valeant became a pharmaceutical giant by acquiring dozens of businesses, amounting to billions of dollars, while managing cost-cuts and merging new products into its operations. However, in the past eight months its shares plunged from the August peak of 262.52 dollars, following criticism of the company’s high prices for its drugs and controversy around its relationship with another specialty pharmaceutical company.

In addition, ratings agencies S& P and Moody’s downgraded the company’s credit rating. Lenders also asked for higher coupon payments following Valeant’s violation of particular debt agreements. The drugmaker also underwent major transitions recently. Several new board seats were added and a search for a new CEO is now on.

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