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Hold the Valeant Applause

Nothing like a bit of M&A speculation to make people forget about a possible criminal probe of your ex-CEO and ex-CFO.

Valeant is reportedly in advanced negotiations with Takeda to sell Salix, a gastrointestinal drug business acquired last year for $11.1 billion, for as much as $10 billion.

It's good news in one sense: It would give Valeant a significant and very badly needed cash infusion to pay off a chunk of its $31 billion in debt and cushion itself against further business declines and substantial legal risk.

It is also good news in the context of Valeant's particular reality distortion field, where news that would be seen as horrible in any other situation is celebrated.

Valeant shares bounced more than 30 percent on Tuesday, but only after hitting a six-year low the day before on the news about its former executives. Hooray?

Here in normal, non-distorted, reality, Valeant may be about to sell a business it bought roughly a year and a half ago at a $1 billion loss. The haircut is even larger if you count the Salix debt Valeant assumed, or if you consider the vaporization of millions in wasted transaction and integration spending. And the deal's immediate payout may only be $8.5 billion; the...