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Paladin Labs pulls out of bidding for Afexa

Cold-FX.

Kevin Van Paassen/Kevin Van Paassen/The Globe and Mail

Valeant Pharmaceuticals International Inc. has emerged as the likely winner in the bidding war for Cold-FX maker Afexa Life Sciences Inc. , after rival bidder Paladin Labs Inc. dropped out of the fight.

Valeant's offer of 85 cents a share for Afexa stock remains the only one on the table after Paladin said Monday that it will not follow through with its last bid, which was at 81 cents a share.

But Paladin will still get a boost from the Valeant deal, since it owns shares of Afexa worth about $5-million.

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Paladin said the reason it walked away from its offer was that Valeant's most recent bid for Afexa contained a break fee of $4.5-million, up from $3.75-million on its earlier 71-cents-a-share bid. When Paladin raised its offer to 81 cents from 55 cents last week, it said it would not keep its bid in place if the Valeant break fee was increased.

Paladin, a Montreal company that distributes dozens of brand-name drugs, first bid for Afexa early in August, offering 55 cents a share. Afexa rejected the proposal as inadequate and began to look for white knights.

Valeant emerged with its proposal, which was supported by Afexa. The bidding war has bounced back and forth, but Afexa's board and management has supported Valeant offers.

Valeant says it can afford to pay more than Paladin for Afexa because it is a larger company with more resources in Canada, and an "extensive international consumer footprint."

Valeant chief executive officer Michael Pearson said he plans to market the popular cold remedy Cold-FX, which is now sold mainly in Canada, in the United States and other international markets.

Valeant, which was formerly headquartered in California, is now a Canadian company after its merger last year with Mississauga-based pharmaceutical giant Biovail Corp.

Analyst Pooya Hemami of Desjardins Securities said Monday he does not expect Paladin to submit another bid for Afexa. But with the $5-million it gleans from its Afexa shares, it will likely look for other acquisitions "to strengthen its growth profile."

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About the Author
Reporter, Report on Business

Richard Blackwell has reported on Canadian business for more than three decades. At the Financial Post and the Globe and Mail he has covered technology, transportation, investing, banking, securities and media, among many other subjects. Currently, his focus is on green technology and the economy. More

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