Valeant launches $400 million convertibles in 6.75-year, 10-year tranches

By Ronda Fears

Nashville, Nov. 13 - With a new moniker to boot, ICN Pharmaceuticals Inc. - now known as Valeant Pharmaceuticals International - launched $400 million of convertible notes early Thursday for a one-day marketing effort via joint bookrunners Goldman Sachs & Co. and Banc of America Securities.

The two-part deal was pricing in the Rule 144A market after the close Thursday.

Tranche A is $200 million of 6.75-year subordinated notes talked to yield 3.0% to 3.5% with a 35% to 40% initial conversion premium. The notes are non-callable, with no puts.

Tranche B is $200 million of 10-year subordinated notes talked to yield 3.75% to 4.25% with a 35% to 40% initial conversion premium. The notes are non-callable for 7.5 years, with no puts.

Holders of both tranches will have dividend protection in the form of a conversion ratio adjustment if the company boosts its common stock cash dividend. Currently there is a 1.29% dividend yield on the common stock.

Both tranches are expected to be rated B.

There is a $40 million greenshoe available on each tranche.

Valeant said a portion of proceeds would be used to hedge the notes and buy written call options, to reduce the potential dilution from conversion of the notes.

Remaining proceeds will be used to retire a portion of ICN Pharmaceuticals' old 6.5% convertible subordinated notes due 2008 by privately negotiated transactions, open market purchases, a tender offer or other means.

Any further remaining proceeds will be used for general corporate purposes, including potential acquisitions.

The name change was made Wednesday, so the stock is still listed as ICN Pharmaceuticals. The new ticker, VRX, goes into effect Friday.

ICN shares closed Thursday down $1.49, or 6.2%, to $22.53. Volume was heavy, with 4.83 million shares changing hands, versus the running three-month daily average of 961,172 shares.

In a media statement, ICN said it has undergone a dramatic transformation since a new management team was appointed in November 2002 and the new name reflects the shift into an integrated, global specialty pharmaceutical company.

"Our new name embodies the core principles that underpin this newly invigorated pharmaceutical company," said Robert W. O'Leary, chief executive of Valeant.

"In recent months, our company has been entirely rebuilt - and re-energized - to reflect the principles and qualities of our people."

Timothy C. Tyson, chief operating officer, said the company has made rapid strides in the past year and a half under new management, which laid out a strategic vision and implemented major changes in product management, research and development, and corporate governance.

Among other things, he noted the company has executed a new global manufacturing strategy, including a rationalization plan that involves selling eight of its 13 remaining manufacturing facilities, which is expected to generate cumulative savings over five years of $150 million to $200 million.

Cost savings at the corporate level amount to $21 million, he said.

Also, the company repurchased the outstanding shares of Ribapharm Inc.

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