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June 21, 2010 4:33 PM

Seven Firms Take Lead on Biovail/Valeant Merger

Posted by Brian Baxter

Biovail, Canada's largest public pharmaceutical company, announced on Monday that it will merge with Aliso Viejo, Calif.-based Valeant Pharmaceuticals in a deal valued at $3.2 billion.

Lawyers from seven firms advised the two companies on a stock swap that precipitated the reverse merger. Executives from both companies will run the combined entity under the Valeant name, according to The Associated Press.

Cravath, Swaine & Moore corporate partner Erik Tavzel, banking and finance partner George Zobitz, tax partner Michael Schler, executive compensation chair Eric Hilfers, antitrust partner Karen DeMasi, and senior banking and finance attorney Christopher Kelly advised Biovail on the deal. The firm has previously advised Biovail on the $230 million acquisition of select pharmaceutical products from Cambridge Laboratories in May 2009 and Tavzel recently handled a €350 million convertible senior debt offering for the suburban Toronto-based company.

Blake, Cassels & Graydon M&A partner David Toswell served as Canadian counsel to Biovail, along with M&A partners Stacy McLean and Shlomi Feiner, antitrust cochair Brian Facey and antitrust partner Julie Soloway, and executive compensation partner John Tuzyk. Sullivan & Cromwell M&A partner Alison Ressler in Los Angeles represented a special committee of the company's board of directors.

Skadden, Arps, Slate, Meagher & Flom M&A partners Stephen Arcano and Jeffrey Brill, banking and finance partner Robert Copen, and tax partner David Rievman led a team from the firm advising Valeant on the deal. Skadden previously advised Valeant on its 2003 acquisition of publicly held shares in Ribapharm, sale of European operations to Meda AB in 2008, and various IP, patent, and securities litigation matters.

Ogilvy Renault M&A partners Gino Martel, Niko Veilleux, and Miguel Manzano, antitrust partner Denis Gascon, tax partner Derek Chiasson, regulatory partner Brian Daley, and banking and finance partner George Maughan provided Canadian counsel to Valeant on the transaction. (The firm has advised Valeant's Canadian unit on corporate and regulatory affairs in the past.)

Ethan Klingsberg, an M&A partner in the New York office of Cleary Gottlieb Steen & Hamilton, advised Goldman Sachs on the deal. Goldman, which served as financial adviser to Valeant, arranged a $2.8 billion term loan with fellow financial advisers Morgan Stanley and Jefferies & Company to facilitate the merger. Jefferies was advised by Greenberg Traurig global M&A cochair David Schwartzbaum, who joined the firm in January from Latham & Watkins, and corporate and securities partner Michael Helsel.

The boards of both companies have approved the deal, which is expected to close by year-end, subject to regulatory and shareholder approval. The newly combined company will continue to be based in Biovail's headquarters in Mississauga, Ontario, according to the Orange County Business Journal. The new company's board of directors will be comprised of five board members from each predecessor company, including one independent Canadian member selected by Valeant with Biovail's assent.

Biovail's name was tarnished in recent years amid long-running battles with regulators and hedge funds over the company's accounting practices and actions by certain executives, including former chairman and CEO Eugene Melnyk, who resigned as chairman in June 2007. (The American Lawyer's Andrew Longstreth covered the legal fallout in this September 2007 feature story.)

When U.S. and Canadian regulators brought securities fraud charges against Melnyk in March 2008, Biovail paid $10 million that same month to settle an accounting probe by the SEC. After being Biovail's largest shareholder for many years, Melnyk sold his remaining stake in March. Several former Biovail executives, including Melnyk, still face charges.

While the litigators have been busy trying to clear ex-Biovail executives in court, this week it was time for corporate lawyers to clear the company's name with the investing public. The market must have liked what it heard about the merger between specialty pharmaceutical manufacturers: Biovail's stock was up in late-day trading on Monday.

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