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Tickers in this Article: MRX, VRX
Valeant Pharmaceuticals International, Inc. (VRX) recently announced that it has entered into an agreement with Medicis Pharmaceutical Corporation (MRX) to acquire the latter for $44.00 per share in cash. The deal value is estimated to be approximately $2.6 billion. We note that the transaction was approved by the Boards of Directors of both Valeant and Medicis and is expected to be completed in the first half of 2013.

The Medicis acquisition price represents a 39% premium over the closing price of last trading day (August 31, 2012) before the announcement. The news was viewed positively by the investors. The share price of both Valeant and Medicis soared after the announcement.

Medicis Pharmaceutical, a specialty pharmaceutical company, is engaged in the development and marketing of products for the treatment of dermatological and aesthetic conditions in the US. Key products include Solodyn, Perlane, Restylane, Ziana, Dysport and Zyclara.

Our Take

We have a positive take on Valeant's acquisition of Medicis. We believe that Medicis' products will complement Valeant's portfolio. The combined US revenues of both companies' dermatology and aesthetics portfolio are expected to cross $1.7 billion.

Post acquisition, we believe that Valeant will be in a position to leverage Medicis' strong presence in the dermatology market to drive growth in the long run. The acquisition is expected to generate synergies of at least $225 million with 6 months of closing the deal. We expect the deal to be accretive for Valeant.

We note that Valeant has been on an acquisition spree to expand its business. In June 2012, the company acquired a US-based specialty oral health company, OraPharma. The company also acquired certain assets from both University Medical Pharmaceuticals and Swiss Herbal Remedies Limited in May 2012.

In April 2012, Valeant had purchased US-based, privately-owned specialty pharmaceutical company, Pedinol Pharmacal, Inc. and certain branded generic assets from Mexican pharmaceutical company, Atlantis Pharma.

In March 2012, Valeant inked a deal to purchase Russian specialty pharmaceutical company Natur Produkt. During the same month, Valeant signed a couple more deals. The company inked a deal to acquire certain branded generic assets from an Austrian pharmaceutical company, Gerot Lannach. Furthermore, Valeant bought a 19.9% stake in a Brazilian biotech company, Pele Nova Biotecnologia S.A.

We remind investors that in 2012, Valeant had kicked off its acquisition spree with Brazilian sports nutrition and food supplements company Probiotica Laboratorios Ltd.

We currently have a Neutral long-term recommendation on both Valeant and Medicis. While Valeant carries a Zacks #4 Rank (Sell rating) in the short run, Medicis carries a Zacks #3 Rank (Hold rating) in the short run.

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