Allergan approaches Salix to fight Valeant bid

Botox-maker Allergan has approached Salix Pharmaceuticals about a potential takeover that could scuttle Valeant Pharmaceuticals' hostile bid for Allergan, the Wall Street Journal reported Tuesday.

Allergan contacted Salix and at least one other pharmaceutical company about a potential deal, the Journal said, citing unnamed sources.

A large Allergan acquisition of another company would add to the price of Valeant's proposed $53.5 billion takeover of the Botox-maker, which Allergan has vigorously fought.

Valeant first bid for Allergan in April, offering $45.6 billion before raising its bid two times.

Allergan has rejected all three bids, while criticizing Valeant's business model and saying a deal would harm Allergan's business. Valeant last week extended its latest offer until the end of 2014.

Valeant's campaign has been supported by activist hedge-fund investor William Ackman, who owns a big stake in Allergan.

A Salix takeover "makes sense" for Allergan because of Salix's "dominance in the gastroenterology space," said a note by Sterne Agee.

However, Salix's profile could also make it a strong candidate for takeover by another pharma company, Sterne Agee added.

Salix notched revenues of $934 million in 2013 and had a market capitalization of about $9 billion prior to Tuesday's reports of the potential Allergan bid.

Salix in July announced that it would merge with a unit of Italian company Cosmo Pharmaceuticals to become an Irish-domiciled subsidiary of Cosmo. It is not clear how an Allergan-Salix deal would affect the Cosmo transaction, the Journal said.

Allergan previously approached Johnson & Johnson and Sanofi about potential deals, but was rebuffed by the larger companies, according to previous US media reports.

Shares of Salix jumped 15.5 percent to $160.80, while Allergan rose 4.0 percent to $161.82. Valeant shares advanced 3.6 percent to $113.72.

Allergan and Salix declined comment.