D.E. Shaw recommends Endo Pharmaceuticals buy back shares, seek alternatives

By Lisa Kerner

Charlotte, N.C., July 30 - Endo Pharmaceuticals Holdings, Inc. investors led by D. E. Shaw Composite Portfolios LLC, owning some 5.6% of the company, believe the company's portfolio is "highly valuable" while its cash balance "remains a widely misunderstood and undervalued asset."

The investor believes the "true fair value" of the company is discounted due to inefficient capital structure, publicly stated intention to diversify away from pain management and the perceived risk of Lidoderm genericization, according to a schedule 13D filing with the Securities and Exchange Commission.

D.E. Shaw recommended the company use its large cash balance for share buybacks, such as a $1.5 billion levered buyback at $35 per share funded using $500 million in available cash and $1 billion in a hybrid debt structure at 5%.

According to the filing, the investor also wants the Chadds Ford, Pa., pharmaceutical company's board to consider all strategic alternatives "prior to pursuing a transaction to diversify away from pain management."

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