Cephalon Stocks Surge After Valeant Makes Bid Public (CEPH, VRX)

Cephalon (NASDAQ: CEPH) stock rose $16.45 this morning, stopping at $75.20 a share after a hostile takeover bid of approximately $5.7 billion from Valeant Pharmaceuticals International (NYSE: VRX). Cephalon's surge is Nasdaq's biggest intraday gain since April 2000.

Cephalon's surge of approximately 28% occurred after Valeant, Canada's largest drugmaker, made their bid of $73 a share public after their private approach was rejected. Yesterday's closing price for Cephalon was $58.75, making the offer a 24% premium for the maker of pain and sleep drugs.

In a research note written today, Cowen & Co analyst Eric Schmidt anticipated that the deal will be done at a higher price than the $73 a share offer and anticipates $75 to $80 a share.

On a conference call today, Michael Pearson, CEO of Valeant, announced that Valeant is open to raising its bid based on findings during due diligence. They are also willing to walk away. Pearson anticipates the deal will be completed soon: "Three weeks from now we should either be done with this or we should be moving on."

Cephalon's surge occurs after a 12% decrease in the past year while Valeant shares have more than doubled in the past 12 months.

Several private approaches have been made by Valeant to acquire Cephalon, which 2010 reported revenue was $2.81 billion. The latest approach occurred in a letter on March 25th, in which Valeant stated an alternative to purchasing the company by offering to buy Cephalon's non-cancer related business for $37 a share in cash.