US regulators urged to review Valeant-Biovail deal

Fri Sep 24, 2010 2:53pm EDT

* Say deal will slash California jobs, tax revenue

* Deal already cleared by FTC

* Shareholders to vote on Sept. 27 (In U.S. dollars unless noted)

By Pav Jordan and Solarina Ho

TORONTO, Sept 24 (Reuters) - Two California legislators have asked U.S. authorities to re-examine a proposed $3.3 billion merger between U.S.-based Valeant Pharmaceuticals International (VRX.N) and Canada's Biovail Corp BVF.TO, days before shareholders are to vote on the deal.

In separate letters, assemblymen Kevin de Leon and Jared Huffman asked the Securities and Exchange Commission and the U.S. Department of Justice to look again at the deal which has already received regulatory approvals.

"I implore you to please take action on this matter immediately to ensure that this proposed merger is in compliance with the law," Huffman said in his letter, dated Sept. 23.

The Valeant-Biovail deal, announced in June, will take advantage of tax breaks and other savings to create a Canadian-based company that retains the Valeant name and is headed by Valeant's existing chief executive, Michael Pearson.

California-based Valeant said earlier this month it planned to cut about 25 percent of the combined company's U.S. and Canadian workforce of 4,400 as part of the integration plan.

"With the new company being headquartered in Canada, the jobs that will be cut will be jobs in the United States," Kevin de Leon, who represents constituents in north Los Angeles, said in his letter, also dated Sept. 23. "That alone is worthy of serious scrutiny from the SEC."

Valeant's chief executive said in a recent letter to employees that more than $300 million of cost synergies had been identified in the deal, with more than $200 million in 2011 and the rest captured in 2012.

De Leon and Huffman say in their letters -- written independently of one another -- that the tax savings represent lost revenue to the state.

The letters come to light just days ahead of a vote on the deal on Monday by shareholders, but analysts do not foresee any obstacles to the transaction.

"This isn't hostile," said William Tanner of Lazard Capital Markets. "It's something both companies want to get done. I don't think there's a chance this is not going to happen."

Neither assemblyman was available for immediate comment on the letters.

Valeant declined comment on the letters and Biovail could not be reached for immediate comment.

($1=$1.03 Canadian) (Editing by Rob Wilson)

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