By Ankur Banerjee and Rod Nickel
(Reuters) - Valeant Pharmaceuticals International Inc (TO:VRX) (N:VRX) increased its offer for Salix Pharmaceuticals Inc (O:SLXP) to $10.96 billion in cash on Monday, eclipsing Endo International Plc (O:ENDP), the only other bidder.
The maker of gastrointestinal drugs has agreed to Valeant's new offer of $173 a share, up from a bid of $158 per share in cash made late last month, the two companies said in a joint statement.
Salix would be the largest purchase ever made by Canada-based Valeant, whose growth has been fueled by acquisitions and cost-cutting. The acquisition would offer solace for dealmaking Valeant Chief Executive Michael Pearson (LONDON:PSON), whose hostile bid for Allergan Inc (N:AGN) failed last year.
It would also boost investor Bill Ackman, who announced last week he had bought a more than $3 billion stake in Valeant after having worked with the company on the Allergan bid.
Still, the deal would sharply raise Valeant's debt, and it is buying a company that last year was forced to slash its full-year earnings forecast.
The short bidding war for Salix pitted Valeant's Pearson against his former protege, Endo Chief Executive Rajiv De Silva.
Salix shares rose 2 percent to $172.75 on the Nasdaq on Monday, while Valeant's U.S.-listed shares gained 2.5 percent to $202.34.
Endo shares climbed 2.7 percent on the Nasdaq to $89.65.
Endo said in a statement it was withdrawing its bid and has other potential deals and research and development on which to focus.
Endo offered last Wednesday to buy Salix in a deal worth about $175 per share in cash and stock. As of Friday's close, Endo's offer was worth $172.56 per share.
Valeant's new offer provides Salix stockholders with about $1 billion more in cash, Valeant said. The deal was expected to close on April 1.
Valeant also announced a $1.45 billion share offering and said it would use the net proceeds, along with borrowed funds and cash on hand to fund the purchase. A source close to the matter said Valeant would not issue more debt to fund the acquisition, according to IFR, a Thomson Reuters publication.
Ackman plans to buy 3 million shares in the offering for about $600 million, the Financial Times reported, citing a person familiar with the situation. Ackman's stake in the company would rise to 6 percent from about 5 percent, the paper said.
Valeant said its bid gives Salix an enterprise value of about $15.8 billion.