Valeant Pharmaceuticals International Inc. agreed to sell about $2.1 billion in assets in two deals, an important first step in the struggling drugmaker’s endeavor to get cash and begin easing its debt burden.
L’Oreal SA, the Paris-based cosmetic giant, will pay Valeant $1.3 billion for three skin-care brands, according to a statement Tuesday. Valeant will also sell its Dendreon Pharmaceuticals unit to closely held Chinese conglomerate Sanpower Group Co. for about $820 million. Valeant’s shares and bonds jumped after the news.
The agreements mark Valeant’s biggest divestitures in almost three years, and a start to its efforts to pay down about $30 billion in debt. It’s a significant break for CEO Joe Papa, who took over in May to help turn around a company that had been embroiled in scandals about high prices and accounting that led to legal and regulatory investigations — along with declines in its share price.
“There is a lot more to do regarding asset sales to help reduce the leverage more meaningfully, but we view this as a good start,” Gary Nachman, an analyst at BMO Capital Markets who rates the shares the equivalent of neutral, wrote in a note to investors.
Nachman and at least three other analysts said Valeant is getting solid prices for the assets, which is good news for a company that’s under pressure to raise cash. The deal with L’Oreal offered the biggest premium, valuing Valeant’s skin-care brands at 7.7 times their annual revenue.
“The valuation is pretty high; this is a decent price,” said Rudi van Den Eynde, who helps oversee about $1 billion in assets at Candriam Investors Group, including L’Oreal shares.
Shares of Valeant, which is headquartered in Laval, Quebec, soared as much as 14 percent, the biggest intraday gain in two months, and were up more than 6.8 percent to $16.40 in after-hours trading.
Proceeds from both sales will be used to permanently repay term-loan debt under Valeant’s senior credit facility, according to the company. 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, Valeant said.