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Merz Drops Out of Bidding for Obagi Medical

By Rich Smith - Apr 8, 2013 at 5:47PM

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Valeant wins.

And so it ends, not with a bang, but a whimper.

On Monday, Germany's Merz Pharma gave up on its attempt to buy Obagi Medical Products (NASDAQ: OMPI) away from initial bidder Valeant Pharmaceuticals (BHC 0.10%). While lamenting that "Obagi was an opportunity worth pursuing given its complementary fit with Merz's portfolio of injectables," Merz CEO Philip Burchard assured investors that "Merz is a disciplined buyer, and at this level, the economics of such a transaction do not meet our requirements."

Valeant, apparently, had other requirements and is expected to proceed with the acquisition of Obagi Medical at a purchase price of roughly $420 million, or 3.7 times Obagi's trailing revenues. The good news: At this price, Valeant is still getting Obagi for a discount to Valeant's own P/S ratio of 6.2.

The better news: Investors still think that's a good enough deal to support and bid up Valeant shares by 0.5% in Monday trading, to close at $72.12. (Obagi shares, on the other hand, slumped 5.7%, as the prospects for a continued bidding war evaporated. Obagi shares closed at $23.98.)

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