Briefs: Bidding war for Obagi escalates, as Valeant ups offer; AstraZeneca plans to sue Actavis

Acquisitive Canadian drugmaker Valeant Pharmaceuticals International (TSX: VRX) today (April 3) announced that its takeover target Obagi Medical Products (Nasdaq: OMPI) has accepted its increased offer of $24.00 per share (up from an original $19.75 made last month , which tops that of German family-owned Merz Pharma’s $22.00 per share counter offer (The Pharma Letters April 2 and March 20).

The news caused Obagi’s shares to rise 9% to $25.03 in early trading, as investors geared up for a takeover fight over a company that makes specialised skin care products to fight signs of aging, sun damage and acne.

Valeant has made its counteroffer from a position of strength – it had a definitive merger offer on the table, and thus should have been ready for a scenario in which a "grey knight suit" emerged, comment analysts at EP Vantage, a unit of Evaluate Pharma. The Canadian group has borrowed massively to fund its buying spree of the last three years, but has remained fearless in the face of that mountain of debt. Merz’s offer to buy Obagi with available cash on hand was a test of its courage, they say.

The offer documents will be amended to reflect the new offer price of $24.00 per share. The expiration date of the tender offer will remain 12:00 midnight, New York City time, on April 23, 2013. The tender offer is conditioned on the tender of a majority of Obagi's shares calculated on a diluted basis, as well as the receipt of certain regulatory approvals and other customary closing conditions. Following the successful completion of the tender offer, a wholly owned subsidiary of Valeant will merge with Obagi and the outstanding Obagi shares not tendered in the tender offer will be converted into the right to receive the same $24.00 per share in cash paid in the tender offer. Obagi's board of directors has unanimously approved the amended transaction.