Valeant to sell $2.1bn in assets to pay down debt

Bloomberg

Valeant Pharmaceuticals International Inc., the embattled Canadian drugmaker, agreed to sell about $2.1 billion in assets to get cash to streamline its businesses and begin easing its debt burden.
L’Oreal SA will pay Valeant $1.3 billion for three skin-care brands, the Paris-based company on Tuesday said in a statement. Earlier in the day, Valeant said it would sell its Dendreon Pharmaceuticals unit to closely held Chinese conglomerate Sanpower Group Co. for about $820 million.
The agreements mark a start to Valeant’s efforts to pay down about $30 billion in debt. The Laval, Quebec-based company has been embroiled in scandals about its drugs’ high prices and accounting that led to legal and regulatory investigations along with declines in its share price. The company’s US shares jumped 13 percent to $17.36 at 6 am New York time in trading before US exchanges opened.
“The valuation is pretty high; this is a decent price” that Valeant is getting for the skin-care brands, said Rudi van Den Eynde, who helps oversee about $1 billion in assets at Candriam Investors Group, including L’Oreal shares.
Proceeds from both sales will be used to permanently repay term-loan debt under Valeant’s senior credit facility, the company said.
The Sanpower transaction is expected to close in the first half of
this year, while the sale to L’Oreal should close in the first quarter,
according to Valeant.

CHALLENGING NESTLE
L’Oreal agreed to pay a high price for the Valeant brands — CerAve, AcneFree and Ambi — to challenge rival Nestle SA in the medicated skin-care industry, said Pierre Tegner, an analyst at Natixis in Paris. Skin care is the largest category in the cosmetics industry, accounting for more than one-third of the global market, according to data tracker MarketResearch.com.
The three brands have combined annual sales of about $168 million and will become part of L’Oreal’s Active Cosmetics Division, alongside La Roche-Posay, Vichy and SkinCeuticals, the buyer said.
“What we can see all over the world, including in the US, is that there’s a huge trend in using
medicated skin care,” Brigitte Liberman, president of the L’Oreal division, said in an interview. “People want to be reassured by what they’re using in terms of skin care, and something developed with a health-care professional is key to reassure the consumer.”
The Sanpower transaction, meantime, gives the Chinese company control over Provenge, an immunotherapy treatment for prostate cancer that is the unit’s only commercialized medicine. Buying Provenge will put Sanpower at the “cutting edge of the global precision medicine industry,” it said.
Valeant bought Dendreon out of bankruptcy in 2015 for $445 million and is selling it at a premium to that price, which is “pretty good in our view,” Irina Koffler, an analyst at Mizuho Securities USA Inc., wrote in a report. She has an underperform rating on Valeant shares.
Started by its chairman Yuan Yafei in 1993, Sanpower owns five listed companies in China including a department store operator and several electronics makers. Real estate development, investment funds and senior-care providers are among its business ventures. A deal spree has also given it many foreign assets including Britain’s House of Fraser department-store chain.