(Reuters) - Valeant Pharmaceuticals International Inc (>> Valeant Pharmaceuticals Intl Inc) (>> Valeant Pharmaceuticals Intl Inc) increased its offer for Salix Pharmaceuticals Inc (>> Salix Pharmaceuticals, Ltd.) to $10.96 billion in cash on Monday, eclipsing Endo International Plc (>> Endo International PLC), the only other bidder.

The maker of gastrointestinal drugs has agreed to Valeant's new offer of $173 a share, up from a bid of $158 per share in cash made late last month, the two companies said in a joint statement.

Salix would be the largest purchase ever made by Canada-based Valeant, whose growth has been fueled by acquisitions and cost-cutting. The acquisition would offer solace for dealmaking Valeant Chief Executive Michael Pearson, whose hostile bid for Allergan Inc (>> Allergan, Inc.) failed last year.

It would also boost investor Bill Ackman, who announced last week he had bought a more than $3 billion stake in Valeant after having worked with the company on the Allergan bid.

Still, the deal would sharply raise Valeant's debt, and it is buying a company that last year was forced to slash its full-year earnings forecast.

The short bidding war for Salix pitted Valeant's Pearson against his former protege, Endo Chief Executive Rajiv De Silva.

Salix shares rose 2 percent to $172.75 on the Nasdaq on Monday, while Valeant's U.S.-listed shares gained 2.5 percent to $202.34.

Endo shares climbed 2.7 percent on the Nasdaq to $89.65.

Endo said in a statement it was withdrawing its bid and has other potential deals and research and development on which to focus.

Endo offered last Wednesday to buy Salix in a deal worth about $175 per share in cash and stock. As of Friday's close, Endo's offer was worth $172.56 per share.

Valeant's new offer provides Salix stockholders with about $1 billion more in cash, Valeant said. The deal was expected to close on April 1.

Valeant also announced a $1.45 billion share offering and said it would use the net proceeds, along with borrowed funds and cash on hand to fund the purchase. A source close to the matter said Valeant would not issue more debt to fund the acquisition, according to IFR, a Thomson Reuters publication.

Ackman plans to buy 3 million shares in the offering for about $600 million, the Financial Times reported, citing a person familiar with the situation. Ackman's stake in the company would rise to 6 percent from about 5 percent, the paper said.

Valeant said its bid gives Salix an enterprise value of about $15.8 billion.

(Reporting by Ankur Banerjee in Bengaluru and Rod Nickel in Winnipeg, Manitoba, additional reporting by Natalie Harrison and Caroline Humer in New York and Anet Josline Pinto in Bengaluru; Editing by Savio D'Souza and Peter Galloway)

By Ankur Banerjee and Rod Nickel