Valeant Pharmaceuticals/Biovail Merger

On June 21, Valeant Pharmaceuticals (NYSE: VRX) and Biovail (NYSE: BVF) announced a definitive merger agreement. The combined company will be called Valeant Pharmaceuticals International, Inc.

Under the terms of the agreement, Valeant stockholders will receive a one-time special cash dividend of $16.77 per share immediately prior to closing of the merger and 1.7809 shares of Biovail common stock upon closing of the merger in exchange for each share of Valeant common stock they own. The transaction is intended to qualify as a tax-free reorganization for Valeant stockholders. Upon the completion of the merger, which is expected to occur before the end of the year, Biovail stockholders will own approximately 50.5 percent and Valeant stockholders will own approximately 49.5 percent of the shares of the combined company on a fully diluted basis. For Biovail stockholders, this transaction represents a 15 percent premium based on a calculation of the stock prices over the last 10 trading days. It is anticipated that by December 31, 2010, contingent upon the closing of the merger and subject to approval by the new Valeant's Board of Directors and to applicable law, the combined company will pay an additional one-time $1.00 per share dividend to all stockholders of the new combined entity, after which the new Valeant does not intend to pay dividends. To finance the transaction, the companies have secured a commitment of $2.8 billion through a term loan facility provided by Goldman Sachs Bank USA, Morgan Stanley & Co. Incorporated, and Jefferies & Company, Inc. Existing Valeant 7.625% and 8.375% senior unsecured notes will be refinanced as part of the transaction.

Goldman, Sachs & Co. and Jefferies & Company, Inc. are serving as financial advisors, and Skadden, Arps, Slate, Meagher & Flom LLP and Ogilvy Renault LLP are serving as legal counsel to Valeant. Morgan Stanley & Co. Incorporated is serving as financial advisor and Cravath, Swaine & Moore LLP and Blake, Cassels & Graydon LLP are serving as legal counsel to Biovail.

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