Salix flat to lower in active trade after merger news; Spectrum sinks on patent ruling

By Rebecca Melvin

New York, Feb. 23 – Salix Pharmaceuticals Ltd.’s convertibles were flat to lower in active trade on Monday after news that Valeant Pharmaceuticals International Ltd. has agreed to buy the Raleigh, N.C.-based specialty drug company for $158.00 per share, or about $10 billion in cash.

The purchase price came in a little lower than many anticipated, a convertibles trader said, noting that had the takeout price been higher at about $180.00 per share, hedged players would have made as many as 5 points on a lighter delta, a trader said. As it was, many light on their deltas lost 0.125 point to 0.25 point.

Elsewhere, Spectrum Pharmaceuticals Inc.’s 2.75% convertibles due 2018 plunged about 10 points on an outright basis, but were said to have held in pretty well nevertheless with a share drop of 16% after a patent ruling that was not favorable to the Henderson, Nev.-based biopharmaceutical company.

In the primary market, price talk was revised for Actavis plc’s planned $4.2 billion of mandatory convertible preferred shares. The dividend talk was tightened to 5.5% to 5.75% from 5.75% to 6.25%, and the premium talk was tightened to 20% to 22.5% from 17.5% to 22.5%. The timing of pricing was also pushed up to late Tuesday from late Thursday.

The repricing took about 1.5 points of value out of the deal, but it was still seen as cheap, a trader said.

© 2015 Prospect News.
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