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Banking & Bankruptcy

The acquisition of Consolidated Rail Corporation

MSc in Corporate Finance

Prepared by:

Maxime Geraudie

Table of content



Question 1

Question 2

Question 3

Question 4

Question 5

Question 1
Why is CSX interest in acquiring Conrail? Describe the arguments for the offer being motivated by the synergies,
the arguments for the offer being motivated by expropriation of creditors, as well as arguments for the motivation to
pre-empt a bid by Norfolk.


US specialty pharmaceutical company founded in

Headquarted in Raleigh, North Carolina
Specialized in the acquisition, development and
commercialization of prescription drugs and
medical devices used in the treatment of
gastrointestinal diseases
Largest player in the gastrointestinal specialization
as of March 2015
Listed on the NASDAQ (SLXP)

SWOT Matrix Analysis



Market leader for gastrointestinal drugs

Exclusive license for the use of the Lumacan

technology in colorectal cancer detection (agreement
with Photocure)

Tarnished reputation: Scandal in June 2014 (out-ofcontrol inventory level which led to CFO resignation)

High inventory levels call for reduction acceleration in

2015: required aggressive sales lower the revenue
predictions for the year

Heavy dependence on the sales of Xifaxan (36% of

sales) and a small number of other drugs

No manufacturing facilities so reliance on third parties

Wide portfolio (22 products)

prescription brands (e.g. Xifaxan)



Strong sales force (approx. 500 employees) with close

ties to gastroenterologists, ranked #1 three times in the
4 past years
Increase in prescription for flagship products (+64% for
Uceris in y-o-y in October 2014)



Likely FDA approval of Xifaxan 550 for treatment of

IBD-S (widespread gastro disease: prevalence rates
range from 10 to 23% in the US)

Extensive development of generic drugs (cheaper and

equally efficient) increases competition and price

High 1-year price targets ($173 according to Jefferies


Regulatory approvals, even if granted, might entail

ongoing requirements or restrictions on marketing

Gastrointestinal disease rates are correlated to obesity

rates and expanding (60 to 70M US citizens affected

Potential product liability claims could prevent or

interfere with product commercialization efforts.

Valuation Summary

Salix Pharmaceuticals Valuation - Range of Implied Equity Value

Public Company

Median to 75th
25th to Median

Discounted Cash Flow