Canada's Valeant Pharmaceuticals International Incorporated has agreed to acquire the Raleigh, North Carolina-based drug company Salix Pharmaceuticals Limited for US$10 billion.

Salix is known for its drug Xifaxan, which is taken to treat irritable bowel syndrome.

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The 2 companies revealed on Sunday that the agreement was done in an "all-cash deal," valued at about $10 billion.

The deal had an enterprise value of $14.5 billion, including Salix's debt and any cash on hand.

Valeant will pay $158 a share, which puts the all-cash transaction at about $10.1 billion.

Over $500 million in annual cost savings is expected to result from the merger within 6 months.

The acquisition is expected to be completed in the second quarter of 2015.

It is the largest ever for Laval, Quebec-based Valeant, which lost a takeover contest for American health care firm Allergan Incorporated last year.

Valeant Chief Executive Officer Michael Pearson says Salix is an "ideal" strategic fit for his company.

Valeant posted a net income of $534.1 million for the fourth quarter of last year.

This is equivalent to $1.56 per diluted share.

This figure is much higher than the $125 million net income during the same period in 2013, which put the amount of each diluted share at 36 cents.

 Revenue rose to $2.28 billion, up from $2.06 billion in the fourth quarter of last year.

The firm expects cash earnings of $2.30 per share in the first quarter of this year.

Pearson says his company is now slowing down its buying pace and will focus on acquiring smaller private companies.

A source says that prior to the merger global security healthcare company Endo International Plc had expressed interest in acquiring Salix.

But Salix declined to talk with Endo.

Just last week, British drug manufacturer Shire Plc was also taking initial steps to buy Salix.

In fact, it was said to be preparing to present a potential offer. 

Sullivan and Cromwell LLP acted as Valeant's legal counsel in the deal, while Salix's adviser was Cadwalader, Wickersham and Taft LLP.

TagsValeant Pharma, Salix Pharmaceuticals