Biovail to merge with Valeant

Shares in Biovail Corp., based in Mississauga, Ont.,soared almost 15 per cent Monday on news ithas agreed to merge with Valeant.

Thedeal offers shareholders of the California-based pharmaceutical company about $3.2 billion US in cash and stock.

Biovail stock closedat $17.08 on the Toronto Stock Exchange, up $2.21 on 4.4 million shares, more than seven times theiraverage daily volume.

The merger will mean deep job cuts between the two firms, with total headcount reduction between 15 and 20 per cent, or between 660 and 880 jobs, the companies said.

The deal means the name of Canada's biggest publicly traded pharmaceutical company will disappear, with the new firm to be calledValeant Pharmaceuticals International Inc. The new company will have a "significantly expanded presence" in North America and operations in eight other countries, the companies said Monday.

The new company's CEO will come from Valeant. But Biovail's current shareholders will own slightly more than half the stock. The headquarters will be in Mississauga.

'Really strange' transaction

Joe d'Cruz, a professor of strategy at the University of Toronto's Rotman School of Business, describedthe dealas a "really strange" transaction.

He told CBC news that "Everything about the transaction says it's a takeover of Valeant," giventhat the headquarters will remain in Canada andmuch of its operations will be here.

D'Cruz suggested that taking the Valeant name shows Biovail is trying to get away froma "tainted reputation."

In 2008, Biovail and several of its top executives were accused of manipulating the company's results to make its performance look better.

The company has settled those allegations and others that it paid doctors to prescribe its blood pressure drug Cardizem LA.

Biovail settled the allegations by making payments to the Securities and Exchange Commission in the U.S. and the Ontario Securities Commission in Canada.

Combined,Biovail and Valeanthad about $1.65 billion US in revenue in 2009. They say their size, financial strength and product lines will allow for significant growth.

"Biovail makes the antidepressant Wellbutrin XL and extended-release pain drug Ultram ER. Valeant, based in Aliso Viejo, Calif., sells treatments for chronic illnesses and generic drugs.

"By the second year after close, we expect to achieve at minimum $175 million in cost [cutting]," Valeant CEO J. Michael Pearson told analysts.