BVF Biovail Corp

 

This summary highlights information contained elsewhere in this joint proxy statement/prospectus and may not contain all the information that is important to you. Valeant and Biovail urge you to read carefully the remainder of this joint proxy statement/prospectus, including the Annexes, the documents incorporated by reference and the other documents to which we have referred you because this summary does not provide all the information that might be important to you with respect to the merger and the other matters being considered at the Valeant and Biovail special meetings. See also the section entitled “Where You Can Find More Information” beginning on page 175. We have included page references in this summary to direct you to a more complete description of the topics presented below.

 

Biovail Corporation (see page 32)

 

Biovail Corporation

7150 Mississauga Road

Mississauga, Ontario

Canada L5N 8M5

Telephone: (905) 286-3000

 

Biovail, a Canadian corporation, is a specialty pharmaceutical company with a strategic focus on developing and commercializing products that address unmet medical needs in specialty central nervous system (“CNS”) disorders. The growth and development of Biovail’s specialty CNS business is financially supported by its former base business model which focused on the development and large-scale manufacture of pharmaceutical products incorporating its oral drug-delivery technologies. While Biovail’s strategy has transitioned to specialty CNS, this base business model continues to provide revenues and significant operating cash flow that can be used to support and fund licensing and acquisition opportunities in specialty CNS. Biovail’s drug delivery expertise also provides support for life cycle management of its specialty CNS products. Biovail also continues to identify and evaluate complementary acquisitions or business opportunities that support its specialty CNS strategy (such as the May 2009 acquisition of the full U.S. commercialization rights to Wellbutrin XL ^® ).

 

Additional information about Biovail and its subsidiaries is included in documents incorporated by reference into this joint proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 175.

 

Biovail Americas Corp. (see page 32)

 

Biovail Americas Corp., a wholly owned subsidiary of Biovail, is a Delaware corporation that holds ownership of Biovail subsidiaries that operate in the United States.

 

Beach Merger Corp. (see page 32)

 

Beach Merger Corp., a wholly owned subsidiary of BAC, is a Delaware corporation that was formed on June 15, 2010, for the sole purpose of effecting the merger. In the merger, Beach Merger Corp. will be merged with and into Valeant, with Valeant surviving as a wholly owned subsidiary of BAC.

 

Valeant Pharmaceuticals International (see page 32)

 

Valeant Pharmaceuticals International

One Enterprise

Aliso Viejo, CA 92656

Telephone: (949) 461-6000

 

Valeant, a Delaware corporation, is a multinational specialty pharmaceutical company that develops, manufactures and markets a broad range of pharmaceutical products. Valeant’s specialty pharmaceutical and OTC products are marketed under brand names and are sold in the United States, Canada, Australia and New Zealand, where Valeant focuses most of its efforts on the dermatology and neurology therapeutic classes. Valeant also has

branded generic and OTC operations in Europe and Latin America which focus on pharmaceutical products that are bioequivalent to original products and are marketed under company brand names.

 

Additional information about Valeant and its subsidiaries is included in documents incorporated by reference in this joint proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 175.

 

Valeant intends to pay to its stockholders of record as of the close of business on the business day immediately preceding the effective time of the merger the pre-merger special dividend, a special dividend of $16.77 per share of Valeant common stock, on the business day immediately preceding the effective time of the merger. The payment of the pre-merger special dividend is a condition to the completion of the merger.

 

The boards of directors of Valeant and Biovail also have determined that, contingent upon the closing of the merger and subject to the discretion of the board of directors of the combined company, and to compliance with applicable law, the post-merger special dividend, a special dividend of $1.00 per common share of the combined company to be declared following the consummation of the merger and contemplated to be paid on December 31, 2010, or such other payment date as the board of directors of the combined company determines, will be in the best interests of the combined company and its shareholders and that it is the intention of those directors of Valeant and Biovail that will continue as directors of the combined company to support the declaration and payment of the post-merger special dividend at the applicable time following the merger.

 

The Merger (see page 42)

 

The board of directors of Valeant and the board of directors of Biovail have agreed to a business combination of their two companies under the terms of the merger agreement. The merger agreement is the product of arm’s-length negotiations between Valeant and Biovail. In order to effect the combination of Valeant and Biovail, Valeant will merge with a wholly owned subsidiary of Biovail, and the name of the combined company will be changed to “Valeant Pharmaceuticals International, Inc.” Valeant and Biovail encourage you to read the entire merger agreement carefully because it is the principal document governing the merger.

 

Terms of the Merger; Merger Consideration (see page 115)

 

In order to effect the combination of Valeant and Biovail, the merger agreement provides for the merger of Beach Merger Corp. with and into Valeant, with Valeant surviving as a wholly owned subsidiary of BAC. On the business day immediately preceding the effective time of the merger, Valeant intends to pay to its stockholders of record the pre-merger special dividend. In the merger, each share of Valeant common stock issued and outstanding immediately prior to the completion of the merger, except for any shares of Valeant common stock held by Valeant, as treasury stock, Biovail, BAC or Beach Merger Corp. (all of which will be cancelled) and other than those shares with respect to which appraisal rights are properly exercised and not withdrawn, will be converted into the right to receive 1.7809 Biovail common shares. Valeant’s convertible notes will be treated as described in “Effect of the Merger on Valeant’s Convertible Notes” beginning on page 98. Valeant’s outstanding restricted stock units and options will be treated as described in “Treatment of Valeant Restricted Stock Units and Options” beginning on page 88.

 

Biovail will not issue any fractional Biovail common shares in the merger. Instead, a Valeant stockholder who otherwise would have received a fraction of a Biovail common share will receive an amount in cash equal to such fractional amount multiplied by the average of the volume weighted average price per Biovail common share on the NYSE on each of the 10 consecutive trading days ending with the second complete trading day prior to the effective time of the merger.

 

Treatment of Valeant Restricted Stock Units and Options (see page 91); Change in Control Provisions (see page 122)

 

Accelerating Restricted Stock Units.   With the exception of restricted stock units held by J. Michael Pearson, each Valeant restricted stock unit award (including performance-based restricted stock units) that, in accordance with its existing terms, provides for vesting, in whole or in part, upon a change in control will vest and settle at the level provided for under the terms of the award on the day prior to the payment of the pre-merger special dividend as if that day was the closing date of the merger (and any performance metrics applicable to the accelerated restricted stock units will be measured as of that day). Any portion of the restricted stock units that vests will be settled in common shares of the combined company at the merger (with the number of shares determined by multiplying the number of shares of Valeant common stock subject to such vested restricted stock unit immediately prior to the completion of the merger by the exchange ratio) and the pre-merger special dividend will be paid to the holder of the restricted stock unit in cash on the business day preceding the effective time of the merger. Any portion of the accelerated restricted stock units that does not vest on the day prior to the payment of the pre-merger special dividend will be forfeited on that day for no consideration.

 

Stock Options and Continuing Restricted Stock Units.   Each stock option to acquire Valeant common stock, each restricted stock unit award that, in accordance with existing terms, does not vest, in whole or in part, upon a change in control, and, except as discussed under “The Merger — Financial Interests of Valeant Directors and Officers in the Merger,” each equity award held by Mr. Pearson (each, a “continuing award”) will be adjusted to take into account the pre-merger special dividend by multiplying the number of shares underlying the award by the “pre-merger special dividend adjustment ratio” of 1.5710 (rounded down to the nearest whole share) and, in the case of stock options, dividing the per share exercise price of the stock option by the pre-merger special dividend adjustment ratio (rounded up to the nearest whole cent). As contemplated by the merger agreement, at the closing of the merger, each continuing award will be converted into an award to acquire common shares of the combined company, on the same terms and conditions as were applicable to the award prior to the merger. The number of common shares of the combined company subject to the award following the merger will be determined by multiplying the number of shares of Valeant common stock underlying the continuing award (as adjusted to take into account the pre-merger special dividend) by the exchange ratio (rounded down to the nearest whole share) and, in the case of stock options, by dividing the per share exercise price (as adjusted to take into account the pre-merger special dividend) by the exchange ratio (rounded up to the nearest whole cent).

 

Change in Control Provisions.   The board of directors of each of Valeant and Biovail has determined that the merger will be deemed to be, and the merger agreement provides that it will be treated as, a change in control under the Valeant and Biovail employee benefit plans and agreements.

 

Effect of the Merger on Valeant’s Convertible Notes (see page 101)

 

In the event a holder of Valeant’s 4.0% Convertible Subordinated Notes due 2013 (the “4% Convertible Notes”) converts its 4% Convertible Notes and receives shares of Valeant common stock prior to the effective time of the merger, those shares would be treated in the merger like all other shares of Valeant common stock. In the event a holder of the 4% Convertible Notes does not convert its notes prior to the effective time of the merger, those 4% Convertible Notes will remain outstanding and will be convertible into the merger consideration payable in respect of the Valeant common stock into which such 4% Convertible Notes would have been convertible prior to the merger, and the conversion rate for the 4% Convertible Notes will be adjusted pursuant to the indenture pursuant to which the notes were issued to account for the pre-merger special dividend. Based on the exchange ratio for the merger, the amount of the pre-merger special dividend (assuming a “Current Market Price” (as defined in the indenture pursuant to which the notes were issued) of $57.75 at the close of business on the record date for the pre-merger special dividend) and the terms of the indenture pursuant to which the notes were issued, after the merger the 4% Convertible Notes would have a conversion rate of 79.3904 Biovail common shares per $1,000 principal amount of notes. On August 16, 2010, Valeant’s outstanding 3.0% Convertible Subordinated Notes due August 16, 2010 (the “3% Convertible Notes”) matured and warrants to purchase Valeant’s common stock issued pursuant to an Exchange Agreement entered into in August 2009 (the “Valeant Warrants”) expired.

 

Material U.S. Federal Income Tax Consequences (see page 102)

 

The Merger.   The merger is intended to qualify as a reorganization within the meaning of Section 368(a) of the Code with no gain or loss recognition to U.S. holders of Valeant common stock for U.S. Federal income tax purposes. It is a condition to the closing of the merger that, at the effective time of the merger, Skadden will deliver to Valeant and Cravath will deliver to Biovail their respective opinions to the effect that (1) the merger should qualify for U.S. Federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code, and (2) U.S. holders of Valeant common stock should not recognize gain under Section 367(a) of the Code on the exchange of their Valeant common stock for Biovail common shares in the merger.

 

Assuming these conclusions are sustained, a U.S. holder of Valeant common stock generally will not recognize any gain or loss upon receipt of Biovail common shares in exchange for Valeant common stock in the merger, except with respect to cash received in lieu of fractional Biovail common shares. If either of these conclusions were to be challenged by the IRS and such challenge were to be sustained, then each U.S. holder of Valeant common stock would recognize gain (and might not be allowed to recognize loss) equal to the difference between the sum of the fair market value of the Biovail common shares and the amount of cash received in the merger (including the pre-merger special dividend to the extent it is not treated as a distribution within the meaning of Section 301 of the Code, as described below, and cash received in lieu of fractional Biovail common shares) and its tax basis in the Valeant shares surrendered in exchange therefor.

 

The conclusions in the tax opinions will not be free from doubt and there are significant factual and legal uncertainties concerning these conclusions (including as to the impact of the pre-merger special dividend described below). In particular, Section 367(a) of the Code and the applicable Treasury regulations promulgated thereunder require that in order for U.S. holders of Valeant common stock to avoid recognizing gain on the exchange of their Valeant common stock in the merger, certain requirements must be met, including that the fair market value of Biovail equal or exceed that of Valeant at the effective time of the merger. There are significant factual and legal uncertainties concerning the determination of fair market value for this purpose. If at the effective time of the merger the fair market value of Valeant were found to exceed that of Biovail, a U.S. holder of Valeant common stock would recognize gain (but not loss) based on the amount such U.S. holder realizes in the merger.

 

The Pre-Merger Special Dividend.   Under the terms of the merger agreement, Valeant stockholders of record as of the close of business on the business day immediately preceding the effective time of the merger will be paid the pre-merger special dividend, a one-time special cash dividend of $16.77 per share, on such business day. The pre-merger special dividend is intended to be treated as a distribution by Valeant within the meaning of Section 301 of the Code and not as consideration paid for Valeant stock in the merger. The tax opinions that are to be delivered by counsels to Valeant and Biovail as a condition to the closing of the merger will be based in part on a determination that the pre-merger special dividend should be treated as such. Assuming this determination is sustained, the pre-merger special dividend will be treated as a dividend for U.S. Federal income tax purposes to the extent paid out of current or accumulated earnings and profits of Valeant. To the extent that the amount of the dividend exceeds Valeant’s current and accumulated earnings and profits, the excess will first be treated as a tax-free return of capital, causing a reduction in the U.S. holder’s adjusted basis in the Valeant common stock. If such basis is reduced to zero, any remaining portion of the pre-merger special dividend will be taxed as capital gain, which would be long-term capital gain if the U.S. holder has held the Valeant common stock for more than one year at the time the pre-merger special dividend is received. However, it is possible that the IRS would disagree with the characterization of the pre-merger special dividend as a distribution by Valeant and instead seek to characterize the pre-merger special dividend as merger consideration paid by Biovail in exchange for a portion of a U.S. holder’s Valeant common stock. If this characterization were to be sustained, the merger would fail to qualify as a reorganization within the meaning of Section 368(a) of the Code.

 

Tax matters are very complicated and the tax consequences of the merger and pre-merger special dividend to each U.S. holder of Valeant common stock may depend on such stockholder’s particular facts and circumstances. Holders of Valeant common stock are urged to consult their tax advisors to understand fully the tax consequences to them of the merger and pre-merger special dividend.

Recommendations of the Board of Directors of Biovail (see page 33)

 

At a special meeting held on June 20, 2010, the Biovail board of directors unanimously determined that the merger and the other transactions contemplated by the merger agreement, including the issuance of Biovail common shares necessary to complete the merger and the issuance of such other Biovail common shares as contemplated by the merger agreement and the amendment of Biovail’s articles of continuance to effect the name change, were advisable and in the best interests of Biovail and its shareholders. Accordingly, the Biovail board of directors recommends that the Biovail shareholders vote “FOR” the proposal to issue Biovail common shares necessary to complete the merger and to issue such other Biovail common shares as contemplated by the merger agreement and “FOR” the proposal to amend Biovail’s articles of continuance to change Biovail’s name to “Valeant Pharmaceuticals International, Inc.”

 

Recommendations of the Board of Directors of Valeant (see page 37)

 

At a special meeting held on June 20, 2010, the Valeant board of directors unanimously (1) determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, are advisable and in the best interests of Valeant and its stockholders, (2) approved the merger and the merger agreement and (3) resolved to recommend adoption of the merger agreement to Valeant stockholders. Accordingly, the Valeant board of directors recommends that the Valeant stockholders vote “FOR” the adoption of the merger agreement and “FOR” the adjournment of the Valeant special meeting, if necessary or appropriate to solicit additional proxies if there are not sufficient votes to adopt the merger agreement at the time of the Valeant special meeting.

 

Opinion of Morgan Stanley & Co. Incorporated, Biovail’s Financial Advisor (see page 56)

 

In connection with the merger, on June 20, 2010, Morgan Stanley & Co. Incorporated (“Morgan Stanley”) rendered to Biovail’s board of directors its oral opinion, subsequently confirmed in writing, that, on such date and based upon and subject to the limitations, qualifications and assumptions set forth in the written opinion, the exchange ratio pursuant to the merger agreement was fair from a financial point of view to Biovail. The full text of Morgan Stanley’s written fairness opinion, which sets forth, among other things, the assumptions made, procedures followed, matters considered and qualifications and limitations on the scope of the review undertaken by Morgan Stanley in rendering its opinion, is attached as Annex B to this joint proxy statement/prospectus. The opinion was directed to the Biovail board of directors and addresses only the fairness from a financial point of view of the exchange ratio pursuant to the merger agreement on the date of the opinion. The opinion does not address any other aspect of the merger and does not constitute a recommendation to any Biovail shareholder or Valeant stockholder as to how to vote or act on any matter with respect to the merger.

 

Opinions of Valeant’s Financial Advisors (see page 72)

 

Opinion of Goldman, Sachs & Co.

 

Goldman, Sachs & Co. (“Goldman Sachs”) delivered its opinion to the board of directors of Valeant that, as of June 20, 2010 and based upon and subject to the factors and assumptions set forth therein, the exchange ratio, together with the pre-merger special dividend to be paid to the holders (other than Biovail and its affiliates) of outstanding shares of Valeant’s common stock, pursuant to the merger agreement was fair from a financial point of view to such holders.

 

The full text of the written opinion of Goldman Sachs, dated June 20, 2010, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex C to this joint proxy statement/prospectus. Goldman Sachs provided its opinion for the information and assistance of the board of directors of Valeant in connection with its consideration of the merger. The Goldman Sachs opinion does not constitute a recommendation as to how any holder of Valeant’s common stock should vote with respect to the merger or any other matter.

 

Opinion of Jefferies & Company, Inc.

 

Valeant retained Jefferies & Company, Inc. (“Jefferies”) to act as a financial advisor to Valeant in connection with the merger and to render to the Valeant board of directors an opinion as to the fairness to the holders of Valeant

common stock of the exchange ratio of 1.7809 pursuant to the merger agreement, together with the pre-merger special dividend of $16.77 per share to be paid to the holders of Valeant common stock. At the meeting of the Valeant board of directors on June 20, 2010, Jefferies rendered its opinion to the Valeant board of directors to the effect that, as of that date and based upon and subject to the various considerations set forth in its opinion, the exchange ratio of 1.7809 pursuant to the merger agreement, together with the pre-merger special dividend of $16.77 per share to be paid to the holders of Valeant common stock, was fair, from a financial point of view, to such holders.

 

Jefferies’ opinion sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the scope of the review undertaken by Jefferies in rendering its opinion. Jefferies’ opinion was directed to the Valeant board of directors and addresses only the fairness from a financial point of view of the exchange ratio, together with the pre-merger special dividend, as of the date of the opinion. It does not address any other aspects of the merger and does not constitute a recommendation as to how any holder of Valeant common stock should vote on the merger or any matter related thereto.

 

The full text of the written opinion of Jefferies is attached to this joint proxy statement/prospectus as Annex D. Valeant encourages its stockholders to read the opinion carefully and in its entirety.

 

Board of Directors and Management After the Merger (see page 90)

 

Under the terms of the merger agreement, upon the effective time of the merger, Mr. Pearson (currently Chairman of the Valeant board of directors and Chief Executive Officer of Valeant) will be appointed the Chief Executive Officer of the combined company, William M. Wells (currently Chief Executive Officer of Biovail and a Biovail director) will be appointed as non-executive Chairman of the board of directors of the combined company, Robert A. Ingram (currently Lead Director of the Valeant board of directors) will be appointed as Lead Director of the board of directors of the combined company and Michael R. Van Every (currently Chairman of the audit committee of the Biovail board of directors and a resident Canadian) will continue as Chairman of the audit committee of the board of directors of the combined company.

 

Under the terms of the merger agreement, upon the effective time of the merger, the board of directors of the combined company will consist of Messrs. Pearson, Wells, Ingram, Van Every, three additional directors selected by Valeant, three additional directors selected by Biovail (one of whom will be a resident Canadian) and one independent director who is recruited by a search firm mutually retained by Valeant and Biovail, which director shall be selected by Valeant from a list of candidates presented by such firm, shall be subject to the approval of Biovail and shall be a resident Canadian.

 

Biovail has selected Dr. Laurence E. Paul, Mr. Robert N. Power and Mr. Lloyd M. Segal (who is a resident Canadian) to continue as members of the board of directors of the combined company.

 

Valeant has selected Theo Melas-Kyriazi, G. Mason Morfit and Norma A. Provencio to serve as members of the board of directors of the combined company.

 

Financial Interests of Biovail Directors and Officers in the Merger (see page 92)

 

Biovail’s directors and executive officers have interests in the merger that are in addition to those of Biovail shareholders generally. The Biovail board of directors was aware of and considered these potential interests, among other matters, in evaluating the merger agreement and the merger, and in recommending to you that you approve the issuance of Biovail common shares necessary to complete the merger and the issuance of such other Biovail common shares as contemplated by the merger agreement and the amendment of Biovail’s articles of continuance to effect the name change. For the Biovail directors who will not remain on the board of directors of the combined company following the merger, these interests include redemption in cash of their deferred share units within 30 days following the completion of the merger, in the case of United States directors, and in one or two payments on dates chosen by the director prior to December 15, 2011, in the case of Canadian directors. For Biovail executive officers, these interests include, in the event of certain terminations of employment following the merger, enhanced severance payments and accelerated vesting of equity compensation. In addition, Mr. Wells has entered into an agreement with Biovail setting forth the terms of his role as non-executive Chairman of the board of directors of the combined company following the merger and providing for certain additional responsibilities during a transition period following the merger. In connection with the merger, the

Biovail board of directors has taken action so that, for any executive officer whose employment is terminated while the executive officer holds any performance-based restricted share units that are scheduled to vest upon such termination, the extent of the vesting of such performance-based restricted share units will be determined based on performance during the applicable performance period through termination of employment and, if termination of employment occurs prior to payment of the post-merger special dividend, for purposes of determining the multiplier used to determine the number of such performance-based restricted share units that will vest, the price per Biovail common share on the day of termination of employment will be increased by the value of the post-merger special dividend. In addition, Biovail will consider the merger a change in control for purposes of employment agreements of its executive officers, which would give rise to enhanced severance benefits upon certain terminations of employment within 12 months following the change in control. Please see the section titled “The Merger — Financial Interests of Biovail Directors and Officers in the Merger” beginning on page 92 for additional information about these interests.

 

Financial Interests of Valeant Directors and Officers in the Merger (see page 96)

 

Valeant’s directors and executive officers have interests in the merger that are in addition to those of Valeant stockholders generally. The Valeant board of directors was aware of and considered these potential interests, among other matters, in evaluating the merger agreement and the merger, and in recommending to you that you adopt the merger agreement. For the Valeant directors, these interests include settlement within thirty days of the merger (and, in some cases, accelerated vesting) of restricted stock units granted to them in 2010, and for the Valeant directors who will not remain on the board of directors of the combined company, settlement of all other grants of restricted stock units on the first anniversary of the merger. The Valeant executive officers hold Valeant stock options and time-based and performance-based restricted stock units, which will be treated as described in “The Merger— Treatment of Valeant Restricted Stock Units and Options” beginning on page 91. As described in that section, Mr. Pearson has agreed to waive accelerated vesting of a portion of his outstanding equity awards. In addition, in connection with entering into the merger agreement, Mr. Pearson has entered into an employment agreement with Biovail and Biovail Laboratories International SRL, a wholly owned subsidiary of Biovail, (“BLS”), which will become effective on the closing of the merger and which will supersede Mr. Pearson’s employment agreement with Valeant. In connection with entering into the new employment agreement and agreeing to waive existing rights to acceleration, and to further incentivize Mr. Pearson, Mr. Pearson will be granted a performance-based restricted share unit award under which Mr. Pearson will be eligible to earn additional shares of the combined company upon achievement of compound annual total shareholder return between 45% and 60% through February 1, 2014, measured off a base price of $13.37 per share. Each of Messrs. De Silva, Min and Blott, Dr. Chaudhuri and Ms. Karlson (who are other Valeant executive officers) are parties to severance agreements or offer letters that provide benefits in the event of a termination of employment following the merger. Please see the section titled “The Merger — Financial Interests of Valeant Directors and Officers in the Merger” beginning on page 96 for additional information about these interests.

 

Regulatory Approvals Required for the Merger and Other Regulatory Matters (see page 110)

 

Valeant and Biovail have agreed to use their reasonable best efforts to obtain all governmental and regulatory approvals required to complete the transactions contemplated by the merger agreement.

 

United States Antitrust.   Under the Hart Scott Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), Biovail and Valeant were required to file notifications with the Federal Trade Commission (the “FTC”) and the Antitrust Division of the Department of Justice and observe a mandatory pre-merger waiting period before completing the merger. Valeant and Biovail each filed its required HSR Act notification and report form with respect to the merger on July 6, 2010. On July 22, 2010, the FTC granted early termination of the waiting period under the HSR Act with respect to the proposed merger contemplated by the merger agreement.

 

Canada.   The merger is not notifiable under Part IX of the Competition Act (Canada). The Commissioner of Competition can, however, apply to the Competition Tribunal on substantive grounds (namely whether the merger prevents or lessens competition substantially or is likely to do so) for a remedial order under Section 92 of the Competition Act (Canada) at any time before the merger has been completed or, if completed, within one year after it was substantially completed.

 

Other Jurisdictions.   In Poland, under the Competition and Consumer Protection Act, Biovail is required to submit a pre-merger notification. On July 2, 2010, Biovail filed its notification with the Polish Competition and Consumer Protection Office (the “CCPO”). In Mexico, under the Federal Economic Competition Law, Biovail was required to submit a pre-merger notification to the Mexican Federal Competition Commission (the “MFCC”). On July 8, 2010, Biovail filed its notification with the MFCC. On July 21, 2010, the MFCC cleared the transaction.

 

Completion of the Merger (see page 116)

 

Valeant and Biovail currently expect to complete the merger before the end of 2010, subject to receipt of required shareholder and regulatory approvals and the satisfaction or waiver of the financing and other conditions to the merger described in the merger agreement.

 

Conditions to Completion of the Merger (see page 125)

 

As more fully described in this joint proxy statement/prospectus and in the merger agreement, the completion of the merger depends on a number of conditions being satisfied or, where legally permissible, waived. These conditions include, among others, the receipt of the approval of Biovail shareholders to issue Biovail common shares necessary to complete the merger and to issue such other common shares as contemplated by the merger agreement and to amend Biovail’s articles of continuance to effect the name change, the adoption by Valeant stockholders of the merger agreement, the receipt of all necessary regulatory approvals (including under antitrust and competition laws), the consummation of the financing (or alternative financing), the payment of the pre-merger special dividend, New York Stock Exchange (“NYSE”) and Toronto Stock Exchange (“TSX”) approval of the listing of the Biovail common shares to be issued in connection with the merger, the accuracy of representations and warranties made by the parties in the merger agreement (subject to certain materiality standards), performance by the parties of their obligations under the merger agreement (subject to certain materiality standards), the absence of a material adverse effect on each party, and the receipt of legal opinions by each party regarding the qualification of the merger as a reorganization with no gain recognition to U.S. holders of Valeant common stock for U.S. Federal income tax purposes. We cannot be certain when, or if, the conditions to the merger will be satisfied or waived, or that the merger will be completed.

 

Termination of the Merger Agreement (see page 126)

 

The merger agreement may be terminated at any time prior to the effective time of the merger under the following circumstances:

 

 

 

 

 

Either party may also terminate the merger agreement prior to the applicable shareholder approval of the other party being obtained if the board of directors of the other party withdraws or modifies in any adverse manner, or proposes publicly to withdraw or modify in any adverse manner, its approval or recommendation with respect to the merger, or in the case of the board of directors of Biovail, the merger or the other matters to be voted on by its

stockholders/shareholders in connection with the merger, or approves or recommends, or proposes publicly to approve, recommend or declare advisable, any alternative transaction with a third party.

 

Expenses and Termination Fees; Liability for Breach (see page 127)

 

Generally, all fees and expenses incurred in connection with the merger and the transactions contemplated by the merger agreement will be paid by the party incurring those expenses. However, upon termination of the merger agreement under certain circumstances, Biovail may be obligated to pay Valeant a termination fee of $100 million and, in other similar circumstances, Valeant may be obligated to pay Biovail a termination fee of $100 million.

 

Appraisal/Dissent Rights (see page 169)

 

Under the merger agreement, Valeant stockholders of record who do not vote in favor of the adoption of the merger agreement and who otherwise comply with the procedures for exercising appraisal rights under Delaware law will be entitled to seek appraisal rights in connection with the merger and, if the merger is completed, obtain payment in cash of the fair value of their shares of Valeant common stock, as determined by the Delaware Chancery Court, instead of the merger consideration. To exercise appraisal rights, Valeant stockholders of record must strictly follow the procedures described by Delaware law.

 

The shareholders of Biovail are not entitled to dissent rights in connection with the merger under the CBCA.

 

Date, Time and Place (see page 33)

 

The special meeting of Biovail shareholders will be held at the Canadian Broadcasting Centre, Glenn Gould Studio, 250 Front Street West, Toronto, Ontario on September 27, 2010, at 10:00 a.m., local time.

 

Purpose of the Biovail Special Meeting (see page 33)

 

At the Biovail special meeting, Biovail shareholders will be asked to vote on the following proposals (the “Biovail proposals”):

 

 

 

 

Completion of the merger is conditioned on approval of the share issuance resolution and the name change resolution.

 

Share Issuance Resolution

 

Pursuant to the rules of the TSX, securityholder approval is required in instances where the number of securities issued or issuable in payment of the purchase price in a transaction such as the merger exceeds 25% of the number of securities of the listed issuer which are outstanding, on a non-diluted basis. Because the merger agreement contemplates the issuance of greater than 25% of the current outstanding Biovail common shares on a non-diluted basis, the rules of the TSX require that Biovail obtain approval of the share issuance resolution by the holders of a majority of the Biovail common shares represented in person or by proxy at the Biovail special meeting.

 

As of the close of business on the date of this joint proxy statement/prospectus, there were approximately 158,646,462 outstanding Biovail common shares. If the merger is completed, Biovail currently estimates that it will issue or reserve for issuance approximately 170,177,852 Biovail common shares (equal to approximately 107% of Biovail’s current issued and outstanding common shares) pursuant to or as contemplated by the merger agreement, including approximately (a) 137,837,582 Biovail common shares issuable in exchange for shares of Valeant common stock in the merger, (b) 24,256,911 Biovail common shares issuable in respect of Valeant stock options (approximately 13,419,867) and Valeant restricted stock units (approximately 10,837,044) that Biovail has agreed to assume pursuant to the merger agreement and (c) 8,083,358 Biovail common shares into which the 4% Convertible Notes will be convertible.

 

Biovail Record Date; Shares Entitled to Vote (see page 34)

 

Only holders of Biovail common shares at the close of business on August 18, 2010, the record date for the Biovail special meeting, will be entitled to notice of, and to vote at, the Biovail special meeting or any adjournments or postponements thereof. On the record date, there were outstanding a total of approximately 158,646,462 Biovail common shares. Each outstanding Biovail common share is entitled to one vote on each proposal and any other matter properly coming before the Biovail special meeting.

 

Required Vote (see page 34)

 

The required votes to approve the Biovail proposals are as follows:

 

 

Share Ownership by and Voting Rights of Biovail’s Directors and Executive Officers (see page 34)

 

As of the close of business on the Biovail record date, Biovail’s directors and executive officers and their affiliates beneficially owned and had the right to vote 211,108 Biovail common shares at the Biovail special meeting, which represents approximately 0.13% of the Biovail common shares entitled to vote at the Biovail special meeting. It is expected that Biovail’s directors and executive officers will vote “FOR” the share issuance resolution and “FOR” the name change resolution.

 

Failure to Vote and Broker Non-Votes (see page 34)

 

If you are a Biovail shareholder and fail to vote or fail to instruct your broker, bank or other nominee to vote, it will have no effect on any of the Biovail proposals, assuming a quorum is present.

 

Date, Time and Place (see page 37)

 

The special meeting of Valeant stockholders will be held at 14 Main Street, Suite 140, Madison, New Jersey 07940 on September 27, 2010, at 10:00 a.m., local time.

 

Purpose of the Valeant Special Meeting (see page 37)

 

At the Valeant special meeting, Valeant stockholders will be asked to vote on the following proposals (the “Valeant proposals”):

 

 

Valeant Record Date; Stock Entitled to Vote (see page 37)

 

Only Valeant stockholders of record at the close of business on August 18, 2010, the record date for the Valeant special meeting, will be entitled to receive notice of, and to vote at, the Valeant special meeting or any adjournments or postponements thereof. As of the close of business on the Valeant record date of August 18, 2010, there were approximately 76,696,012 shares of Valeant common stock outstanding and entitled to vote at the Valeant special meeting. Each holder of Valeant common stock is entitled to one vote for each share of common stock owned as of the Valeant record date.

 

Required Vote (see page 38)

 

The required votes to approve the Valeant proposals are as follows:

 

 

Stock Ownership by and Voting Rights of Valeant’s Directors and Executive Officers (see page 37)

 

At the close of business on the Valeant record date, Valeant’s directors and executive officers and their affiliates beneficially owned and had the right to vote 15,853,000 shares of Valeant common stock at the Valeant special meeting (which includes shares of which Mr. Morfit may be deemed to share beneficial ownership, as a member of the management board of ValueAct Holdings GP, LLC, which entity controls the general partner and the manager of ValueAct Capital Master Fund, L.P.), which represents approximately 21% of the Valeant common stock entitled to vote at the Valeant special meeting. It is expected that Valeant’s directors and executive officers will vote their shares “FOR” the adoption of the merger agreement and “FOR” the adjournment of the Valeant special meeting, if necessary or appropriate to solicit additional proxies if there are not sufficient votes to adopt the merger agreement at the time of the Valeant special meeting.

 

Failure to Vote, Broker Non-Votes and Abstentions (see page 38)

 

If you are a Valeant stockholder and fail to vote, fail to instruct your broker, bank or other nominee to vote, or mark your proxy or voting instructions to abstain, this will have the effect of a vote against the proposal to adopt the merger agreement. If you are a Valeant stockholder and are present in person at the Valeant special meeting and abstain from voting or mark your proxy or voting instructions to abstain, this will have the effect of a vote “against” the proposal to approve the adjournment of the Valeant special meeting. If you are a Valeant stockholder and are not present in person at the Valeant special meeting and do not respond by proxy, this will have no effect on the vote held on the proposal to approve the adjournment of the Valeant special meeting. Failure to instruct your broker, bank or other nominee to vote will also have no effect on the vote held on this proposal.

 

Since the merger was announced on June 21, 2010, Valeant, certain Valeant directors, Biovail, BAC and Beach Merger Corp. have been named as defendants in one or more of the four purported stockholder class actions filed in the Superior Court of California, County of Orange by stockholders of Valeant challenging the proposed merger. The actions seek, among other things, to enjoin the defendants from completing the merger on the agreed upon terms. Three other purported stockholder class actions have been filed in the Court of Chancery for the State of Delaware that also bring claims against Valeant, Valeant’s directors, Biovail, BAC and Beach Merger Corp. and similarly seek to enjoin the defendants from completing the merger.

 

As a condition to Biovail’s willingness to enter into the merger agreement, Valeant and Biovail entered into a voting agreement (the “voting agreement”), dated as of June 20, 2010, with ValueAct Capital Master Fund, L.P. (“ValueAct Capital”), pursuant to which ValueAct Capital agreed, upon the terms and subject to the conditions set forth in the voting agreement, to (1) vote its shares of Valeant common stock for the merger and against any competing transaction that may be proposed and (2) not sell or otherwise transfer its shares, except in connection with the merger. As of June 20, 2010, ValueAct Capital beneficially owned shares of Valeant common stock equal to approximately 20.0% of the outstanding shares of Valeant common stock.

 

Valeant and Biovail have entered into a commitment letter (the “commitment letter”), dated as of June 20, 2010, with Goldman Sachs Bank USA (“GS Bank”), Goldman Sachs Lending Partners LLC (“GSLP”), Jefferies Group, Inc. (“Jefferies Group”) and Morgan Stanley Senior Funding, Inc. (“Morgan Stanley Senior Funding”) (such financial institutions being referred to as the “commitment parties”), pursuant to which the commitment parties have committed to provide up to $3.022 billion in loans for the purposes of (1) refinancing Valeant’s existing credit facility, 8.375% Senior Notes due 2016 and 7.625% Senior Notes due 2020, (2) funding the pre-merger special dividend and certain expenses incurred in connection with the merger, (3) providing post-closing liquidity to the combined company and (4) funding the post-merger special dividend.

 

The commitment letter provides for the following facilities:

 

 

The financing commitments of the commitment parties are subject to various conditions set forth in the commitment letter.

 

Valeant, Biovail and the commitment parties are currently finalizing the structure of the financing to be incurred in connection with the transaction, including the form of the debt to be incurred as well as the parties that will incur such indebtedness. It is expected that Valeant, Biovail and the commitment parties will enter into definitive loan documents with respect to the financing as contemplated by the commitment letter or with such changes to which the parties may agree prior to the closing of the merger.

 

The following selected consolidated financial information of Biovail as of December 31, 2009 and 2008 and for the fiscal years ended December 31, 2009, 2008 and 2007, has been derived from the audited financial statements appearing in Biovail’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, incorporated by reference in this joint proxy statement/prospectus. The selected financial information as of December 31, 2007, 2006 and 2005 and for the fiscal years ended December 31, 2006 and 2005 was derived from historical financial statements not incorporated by reference in this joint proxy statement/prospectus.

 

The selected consolidated financial data of Biovail as of and for the six months ended June 30, 2010 and 2009 are derived from Biovail’s unaudited consolidated financial statements and related notes contained in its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2010, which is incorporated by reference in this joint proxy statement/prospectus. In the opinion of Biovail’s management, all adjustments necessary for a fair presentation of the interim three-month financial information have been included. The information set forth below is only a summary and is not necessarily indicative of the results of future operations of Biovail or the combined company, and you should read the following information together with Biovail’s audited consolidated financial statements, the notes related thereto and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Biovail’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, and Biovail’s unaudited consolidated financial statements, the notes related thereto and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Biovail’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2010, which are incorporated by reference in this joint proxy statement/prospectus. For more information, see the section entitled “Where You Can Find More Information” beginning on page 175.

 

 

 

 

 

The following selected consolidated financial information of Valeant as of December 31, 2009 and 2008 and for the years ended December 31, 2009, 2008 and 2007, has been derived from the audited financial statements appearing in Valeant’s Annual Report on Form 10-K for the year ended December 31, 2009, incorporated by reference in this joint proxy statement/prospectus. The selected financial information as of December 31, 2007, 2006 and 2005 and for the years ended December 31, 2006 and 2005 was derived from historical financial statements not incorporated by reference in this joint proxy statement/prospectus.

 

The selected consolidated financial data of Valeant as of and for the six months ended June 30, 2010 and 2009 are derived from Valeant’s unaudited consolidated financial statements and related notes contained in its Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2010, which is incorporated by reference in this joint proxy statement/prospectus. In the opinion of Valeant’s management, all adjustments necessary for a fair presentation of the interim six-month financial information have been included. The information set forth below is only a summary and is not necessarily indicative of the results of future operations of Valeant or the combined company, and you should read the following information together with Valeant’s audited consolidated financial statements, the notes related thereto and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Valeant’s Annual Report on Form 10-K for the year ended December 31, 2009, and Valeant’s unaudited consolidated financial statements, the notes related thereto and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in Valeant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2010, which are incorporated by reference in this joint proxy statement/prospectus. For more information, see the section entitled “Where You Can Find More Information” beginning on page 175.

 

 

 

 

Notes to Selected Financial Data:

 

 

 

 

 

 

The following table shows summary unaudited pro forma condensed combined financial information regarding the financial condition and results of operations of the combined company after giving effect to the merger. The summary unaudited pro forma condensed combined financial statements have been prepared using the acquisition method of accounting under existing accounting principles generally accepted in the United States of America (“U.S. GAAP”) under which the assets and liabilities of Valeant will be recorded by Biovail at their respective fair values as of the date the merger is completed. The summary unaudited pro forma condensed combined balance sheet assumes that the merger took place on June 30, 2010. The summary unaudited pro forma condensed combined statements of income for the fiscal year ended December 31, 2009, and for the six months ended June 30, 2010, assume that the merger took place on January 1, 2009, the first day of Biovail’s 2009 fiscal year.

 

The summary unaudited pro forma condensed combined financial information has been derived from and should be read in conjunction with the more detailed unaudited pro forma condensed combined financial statements of the combined company appearing elsewhere in this joint proxy statement/prospectus and the accompanying notes to the unaudited pro forma condensed combined financial statements. In addition, the summary unaudited pro forma condensed combined financial statements were based on and should be read in conjunction with the historical consolidated financial statements and related notes of both Valeant and Biovail for the applicable periods, which have been incorporated in this joint proxy statement/prospectus by reference. See “Where You Can Find More Information” beginning on page 175 and “Biovail Corporation and Valeant Pharmaceuticals International Unaudited Pro Forma Condensed Combined Financial Statements” beginning on page 134.

 

The summary unaudited pro forma condensed combined financial information has been presented for informational purposes only. The summary unaudited pro forma condensed combined financial information is not necessarily indicative of what the combined company’s financial position or results of operations actually would have been had the merger been completed as of the dates indicated. In addition, the summary unaudited pro forma condensed combined financial information does not purport to project the future financial position or operating results of the combined company. Also, as explained in more detail in the accompanying notes to the unaudited pro forma condensed combined financial statements, this information excludes certain third quarter events and the preliminary allocation of the pro forma purchase price reflected in the unaudited pro forma condensed combined financial information is subject to adjustment and may vary significantly from the actual purchase price allocation that will be recorded upon completion of the merger. Furthermore, the determination of the final purchase price will be based on the number of shares of Valeant common stock outstanding immediately prior to completion of the merger and the price of Biovail common shares immediately prior to completion of the merger.

 

 

 

 

 

 

Valeant’s common stock is listed and traded on the NYSE under the symbol “VRX.” Biovail’s common shares are listed and traded on the NYSE and TSX under the symbol “BVF.” The following table sets forth, for the fiscal quarters indicated, the high and low sales price per share of Valeant common stock and the high and low sales price per share of Biovail common shares, in each case as reported on the NYSE. In addition, the table also sets forth the quarterly cash dividends per share declared by Valeant (excluding the pre-merger special dividend) with respect to its common stock and Biovail with respect to its common shares. On the Valeant record date (August 18, 2010), there were approximately 76,696,012 shares of Valeant common stock outstanding. On the Biovail record date (August 18, 2010), there were approximately 158,646,462 Biovail common shares outstanding.

 

 

The following tables set forth certain historical, pro forma and pro forma equivalent per share financial information for Valeant common stock and Biovail common shares. The pro forma and pro forma equivalent per share information gives effect to the merger as if the merger had occurred on June 30, 2010 in the case of book value per share data and as of January 1, 2009 in the case of net income per share data.

 

The pro forma per share balance sheet information combines Valeant’s June 30, 2010 unaudited consolidated balance sheet with Biovail’s June 30, 2010 unaudited consolidated balance sheet. The pro forma per share income statement information for the fiscal year ended December 31, 2009, combines Valeant’s audited consolidated statement of income for the fiscal year ended December 31, 2009, with Biovail’s audited consolidated statement of income for the fiscal year ended December 31, 2009. The pro forma per share income statement information for the six months ended June 30, 2010, combines Valeant’s unaudited consolidated statement of income for the six months ended June 30, 2010, with Biovail’s unaudited consolidated statement of income for the six months ended June 30, 2010. The Valeant pro forma equivalent per share financial information is calculated by multiplying the unaudited Biovail pro forma combined per share amounts by the 1.7809 exchange ratio.

 

The following information should be read in conjunction with the audited consolidated financial statements of Valeant and Biovail contained in Valeant’s and Biovail’s Annual Reports on Form 10-K for the year ended December 31, 2009, and the unaudited consolidated financial statements of Valeant and Biovail contained in Valeant’s and Biovail’s quarterly reports on Form 10-Q for the quarterly period ended June 30, 2010, which are incorporated by reference in this joint proxy statement/prospectus, and the financial information contained in the section entitled “Biovail Corporation and Valeant Pharmaceuticals International Unaudited Pro Forma Condensed Combined Financial Statements” beginning on page 134. The unaudited pro forma information below is not necessarily indicative of the operating results or financial position that would have occurred if the merger had been completed as of the periods presented, nor is it necessarily indicative of the future operating results or financial position of the combined company. In addition, the unaudited pro forma information does not purport to indicate balance sheet data or results of operations data as of any future date or for any future period.