Auxilium shakes off Endo's $2.2B offer and affirms its eye on QLT

Auxilium CEO Adrian Adams

Auxilium Pharmaceuticals ($AUXL) has no intention of accepting a multibillion-dollar bid from Endo ($ENDP), the company said, preferring to stay the course and pull off an en-vogue tax inversion as it looks to cut costs.

Endo's unsolicited offer, amounting to about $2.2 billion, "significantly undervalues" Auxilium, the company's board said in a statement, shrugging off a deal that would pay $28.10 a share. Instead, Auxilium would rather go with Plan A: reverse-merging into Canada's QLT ($QLTI) under a deal signed in June that would slash its tax rate.

Under the yet-to-close merger, Auxilium would meld into QLT, giving current investors about 3.1 QLT shares for each of Auxilium share they hold, leaving them with about 76% of the combined company. The resulting tax and cost savings will fuel Auxilium's "aggressive pursuit of product licensing and M&A," CEO Adrian Adams said in June.

But Endo wants no part of QLT, and CEO Rajiv De Silva is making his case directly to Auxilium shareholders, talking up the cash premium built into his company's offer and the potential synergies between the two drugmakers.

Now Auxilium's board is hoping investors share its CEO's optimism, urging shareholders to vote in favor of the QLT deal, which the company expects to close by year's end.

Endo's bid, disclosed last week, sent Auxilium's shares soaring more than 40%, settling above the $31 mark.

Meanwhile, the company has been working to reduce its costs across the board, this month unveiling plans to reduce its workforce by 30% and roll back its annual budget by $75 million.

- read the statement

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