The discount that Valeant Pharmaceuticals (NYSE: VRX ) looked likely to claim on its proposed buyout of specialty pharma company Obagi Medical Products (UNKNOWN: OMPI.DL ) is getting smaller by the day.
In March, Valeant made an initial bid of $19.75 per share for Obagi, a price only 2.9 times the value of Obagi's annual revenues. Yesterday, German rival Merz Pharma trumped that offer with a $22-per-share bid of its own.
Today, Valeant responded in kind, increasing its bid to $24 cash per share. But investors seem to expect this bidding war to continue, and the price to continue to rise. As of this writing, Obagi shares are up 10% in Wednesday trading, and their new share price -- $25.15 -- perhaps indicates we can expect a new bid from Merz in fairly short order.
The Obagi board supports the latest Valeant offer.