Shares of Endo International (ENDP) declined 2.27% to close the trading session on Sep 22 at $66.16 following Auxilium Pharmaceuticals’ (AUXL) rejection of Endo’s unsolicited takeover bid. Auxilium Pharma after reviewing Endo’s $2.2 billion or 28.10 per share offer turned it down as it felt that the proposal grossly undervalued the company.

However, Auxilium Pharma did not shut the door permanently as far as a takeover by Endo was concerned. Auxilium Pharma stated that it was still open to further talks with the Ireland-based company on the issue. A day after Endo submitted its proposal to acquire Auxilium Pharma, the latter while agreeing to review the offer, had adopted a “poison pill” (one year shareholder rights plan) with a 15% trigger to prevent a hostile takeover attempt.

Such a defensive tactic is often adopted by a board to prevent bidders (here Endo) from negotiating a price for the sale of shares directly with its (here Auxilium Pharma) stakeholders. Through this measure, Auxilium Pharma has attempted to make its shares less attractive to Endo.

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After reviewing Endo’s offer, Auxilium Pharma said that it stood by the merger deal inked with Canadian company QLT (QLTI) in June this year. Auxilium Pharma, which has been performing disappointingly over the last few quarters as a standalone company, entered into a definitive merger agreement with QLT primarily to cut its tax bill.

Though Auxilium turned down Endo’s current offer, it did not close the doors permanently on Endo. Auxilium is still willing to talk to Endo on the issue.

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Consequently, we believe that the last has not yet been heard on the issue and the two companies might work out a more attractive offer in the future. We expect investors to remain glued to updates on the issue.

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