The Zacks Analyst Blog Highlights: Safeway, Valeant Pharmaceuticals, Obagi Medical Products, Allergan and Avanir Pharmaceuticals

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Apr 10, 2013, 09:30 ET

CHICAGO, April 10, 2013 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Safeway (NYSE:SWY), Valeant Pharmaceuticals (NYSE:VRX), Obagi Medical Products, Inc. (Nasdaq:OMPI), Allergan, Inc. (NYSE::AGN) and Avanir Pharmaceuticals Ltd. (Nasdaq:AVNR).

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Here are highlights from Tuesday's Analyst Blog:

Safeway's Blackhawk Settles IPO Price

Safeway's (NYSE:SWY) majority-owned subsidiary Blackhawk Network Holdings disclosed that it has altered the registration statement for its initial public offering (IPO) with the Securities and Exchange Commission. The company now expects to raise up to $220 million from the IPO.

Last month, Blackhawk announced a registration statement filing for the highly anticipated IPO of a minority stake. However, the company did not disclose the number of shares and the price range for the offering at the time.

The company has now priced 10 million shares at an estimated offering price of $20 to $22 per share. The IPO will comprise solely of shares by current stockholders, including Safeway. The underwriters have an option to purchase another 1.5 million shares.

Blackhawk provides prepaid products and payment services to consumers through a network of retail store locations in the U.S. and 18 other nations. Additionally, Blackhawk provides card production services, a secondary market for prepaid cards and has recently introduced digital wallet services. Blackhawk also has gift card businesses in U.K. and Australia.

Investors have been looking forward to the IPO ever since Safeway revealed its plan to spin off Blackhawk into a public company in Sep 2012. Given the revival of growth trends and the recent bullish run of the stock, the timing of the announcement is apt. While Safeway has been on a strong uptrend, the stock is likely to appear more valuable on the back of the announcement.

The spin-off of its Blackhawk subsidiary reflects solid future growth plans for Safeway. Following the public offering, we expect the company to sharpen focus on its mainstream retail operations and improve its competitive position against peers. Safeway is expected to launch a Wellness initiative in the second quarter of 2013 to tap growth opportunities in the fast growing healthcare market in the U.S.

Valeant: The Sole Suitor for Obagi

Valeant Pharmaceuticals' (NYSE:VRX) proposed acquisition of Obagi Medical Products, Inc. (Nasdaq:OMPI) received a boost with Merz Pharma Group opting out of the race to purchase Obagi. Merz's decision ended the bidding war between Valeant and itself.

Merz Pharma's decision came in wake of an increased acquisition offer from Valeant Pharmaceuticals. We note that on Apr 2, 2013, Merz Pharma offered to acquire Obagi for $22 per share in cash after Valeant proposed to acquire Obagi for $19.75 per share on Mar 19, 2013. Subsequently, Valeant upped its offer price to $24.00.

The increased offer price represented a 56% premium to Obagi's closing share price on Mar 19, 2013 compared to 28% premium offered earlier. The amended agreement was unanimously approved by Obagi's board.

We note that Obagi develops markets and sells products, which prevent or improve the most common and visible skin disorders.

With leading dermatology brands such as Obagi Nu-Derm, Condition & Enhance, Obagi-C Rx, ELASTIDerm and CLENZIDerm in its portfolio, Obagi has grown its revenues from $35.6 million in 2001 to $120.7 million in 2012.

Valeant also has a strong presence in the dermatology field. We believe that Valeant's acquisition of Obagi, on materializing, would further strengthen Valeant's dermatology portfolio and pave way for new growth opportunities.

We note that acquisition activity has been quite strong in recent times in the dermatological segment. In Dec 2012, Valeant acquired the entire outstanding common stock of Medicis Pharmaceutical Corporation for approximately $2.6 billion.

The erstwhile Medicis Pharma focused on the development and marketing of products for the treatment of dermatological and aesthetic conditions in the US.

Meanwhile, Allergan, Inc. (NYSE::AGN) acquired privately-held SkinMedica, Inc. in Dec 2012 with a focus on the latter's topical aesthetics skin care business.

Valeant currently carries a Zacks Rank #3 (Hold). Right now, Avanir Pharmaceuticals Ltd. (Nasdaq:AVNR) looks better positioned with a Zacks Rank #2 (Buy).

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