Israel's Teva Pharmaceutical Industries Ltd., the world's biggest maker of generic drugs, agreed to buy American rival Barr Pharmaceuticals Inc. for $7.46 billion in to expand into new markets and widen its lead in this segment. The Sandoz division of Swiss drugmaker Novartis AG is the second-largest maker of generic drugs.
The deal is the latest in a wave of consolidation in the generic-drug sector that some analysts suspect will result in only a handful of major global players.
The proposed acquisition of India's biggest drugmaker Ranbaxy by Japanese major Daiichi Sankyo Company is one such deal. ( See: Daiichi to make open offer for Ranbaxy on August 8)
Sun Pharmaceutical's proposed $454 million takeover of Israel's Taro Pharmaceutical Industries Ltd is another. (See: Sun Pharmaceutical to acquire Taro Pharma for $454 million)
The purchase price values Barr at $66.50 a share, up 16 per cent from yesterday's close, the companies said today in a statement. Barr, based in Montvale, New Jersey, had already risen 22 per cent yesterday on unconfirmed reports of the purchase by Teva, of Petah Tikva, Israel. Barr rose to $62 in early trading, while Teva rose 2 per cent to $42.
For each share of common stock, Barr shareholders will receive $39.90 cash and 0.6272 of Teva American depositary receipts valued at $26.60, based on the $42.41 closing price of Teva's ADRs on 16 July, the companies said. In addition, Teva will assume Barr's debt of about $1.5 billion. Teva will fund the acquisition with cash, marketable securities and long-term debt, it said.
The acquisition will not only expand the company's presence in the US but will also "significantly strengthen its position in key European and Central and Eastern European markets," Teva said.
The combined company would be a generic powerhouse employing about 37,000 people globally and operating in more than 60 countries. Together, Barr and Teva had revenue of about $11.9 billion in 2007. By acquiring Barr, Teva would move closer to its stated goal of increasing its market share in the US to 30 per cent of generic prescriptions by 2012, from about 20 per cent.
Teva also expects to generate annual cost savings of at least $300 million within three years. If the merger is terminated under certain circumstances, Barr will be required to pay a termination fee of $200 million, Teva said.
Barr bought Croatian generic drugmaker Pliva in 2006, giving it greater reach into Eastern Europe and enhancing its manufacturing capacity for biologic drugs. Barr, which specializes in oral contraceptives, is best known for its controversial birth-control drug "Plan B," also known as the "morning-after pill."
The Barr deal is the biggest in the generics industry since Teva's $7.6 billion takeover of US-based Ivax Corp. in January 2006. Teva is paying a combination of cash and stock for Barr. Barr's CEO Bruce L Downey said he doesn't expect another bidder.
Lehman Brothers acted as financial adviser to Teva, and Willkie Farr & Gallagher LLP provided legal counsel for Teva. Banc of America Securities LLC acted as financial adviser to Barr in this transaction, and Simpson Thacher & Bartlett LLP provided legal counsel for Barr.