By Zeba Siddiqui

(Reuters) - Salix Pharmaceuticals Ltd <SLXP. O> will buy Santarus Inc <SNTS. O> for about $2.6 billion, gaining two new gastroenterology drugs to strengthen its leading presence in that market and sending its shares 10 percent higher.

The deal brings together two companies seen as having complementary product portfolios and will mark Salix's biggest acquisition in at least the last ten years - a period when it made as many as six.

In addition to the two gastroenterology drugs, biotech firm Santarus has two type 2 diabetes drugs and a cholesterol drug on the market. Robust sales of the products helped the company's sales rise 81 percent to about $99 million in the third quarter ended September.

The combined company will have 22 products on the market.

Salix's $32 per share offer is a 37 percent premium to Santarus' Thursday close on the Nasdaq. In extended trade, Santarus shares rose to $31.90, while Salix's 10 percent climb takes to its shares to $78, a five-fold increase for the year to date.

Salix said it expects Santarus to significantly add to earnings next year, when it expects adjusted profit of $5 per share, up from $3.20 per share it has forecast for the current year.

Salix Chief Executive Carolyn Logan told analysts on a conference call that none of the two companies' target markets overlapped and that Salix's expertise in the gastrointestinal market will help improve sales of Santarus's bowel disease drug Uceris, which launched in the United States in February.

The company plans to pay for the acquisition with about $800 million in cash on hand and $1.95 billion in financing from Jefferies Finance LLC. Logan said she expects the combined company to generate strong cash flow that would lead to rapid repayment of this debt.

Chief Financial Officer Adam Derbyshire said the company will continue to look for more "tuck-away type" acquisition opportunities.

Jefferies LLC advised Salix on the deal, while Covington & Burling LLP acted legal counsel. Santarus was advised by Stifel, Nicolaus & Co while Latham & Watkins LLP was its legal advisor.

(Editing by Joyjeet Das, Anil D'Silva and Edwina Gibbs)


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