Actavis to acquire Irish specialty drug maker Warner Chilcott for $5 bn

Actavis Inc, the largest generic drug maker in the US by market value, today said it would buy Irish specialty pharmaceutical company Warner Chilcott Plc for $5 billion in stock.

The talks come a few weeks after Actavis put on hold merger talks with Canada's Valeant Pharmaceuticals International Inc after both companies differed on the size of the cash premium to be paid in the over $13 billion all-stock acquisition of Actavis.

New Jersey-based Actavis will offer 0.16 share of the combined company, which would be $20.08 per share, based on Actavis's closing share price of $125.50 on 17 May.

The purchase price is a 34 per cent premium to Warner Chilcott's closing share price of $15.01 on 9 May, the day before the companies disclosed that they were in talks.

The Warner Chilcott deal is worth $8.5 billion, including debt.

In April 2012, Ireland-based Warner Chilcott, which makes women's healthcare, dermatology, gastroenterology and urology products, had announced plans to explore strategic options, including a possible sale and had hired Goldman Sachs Group as its financial adviser.

Reuters had then reported that the drug maker received buyout offers from three potential suitors, including both private equity and industry buyers, but their offers did not meet with its expectations of around $25 a share.

Warner Chilcott, which makes a range of products that include well-known oral contraceptives Loestrin 24 FE, Femcon FE and Ovcon, was taken private in a $2.1 billion deal in 2005 by a consortium that included Thomas Lee Partners, Bain Capital, JPMorgan Chase & Co and Credit Suisse.

It returned as a public company in 2007, but Credit Suisse sold its stake in 2010, while the others still own about 30 per cent.

Since being spun out of Warner-Lambert in 1996, Warner Chilcott has grown through a series of acquisitions and divestitures, from a small seller of undifferentiated products to a fully integrated pharmaceutical company with a broad portfolio of leading branded products.

Its largest acquisition was carried out in 2009, when it purchased Procter & Gamble's global prescription drug business for about $3.1 billion.

Actavis, the world's third-largest generic drugmaker was established in January after New Jersey-based Watson Pharmaceuticals acquired it for around $5.60 billion, in order to expand in Europe.

It develops, manufactures and markets generic, branded generic, legacy brands and over-the-counter (OTC) products in more than 60 countries.

With 30 manufacturing and distribution facilities around the world, including in China, India, Indonesia and Singapore, the company is ranked among top 3 in 12 global markets, top 5 in 16 global markets, and top 10 in 33 global markets.

Actavis has one of the broadest product portfolios and strongest pipelines in the generics industry. It has more than 750 molecules in 1,700 dosage combinations marketed globally through operations in more than 60 countries and around 40 per cent of its generic drug revenue comes from outside the US.

Actavis Specialty Brands, formerly known as the Global Brands business, markets more than 40 brand pharmaceutical products, primarily in the US.

Actavis Pharma also develops and out-licenses generic pharmaceutical products outside the US through its Medis third-party business, the world's largest generic pharmaceutical out-licensing business. Medis has more than 300 customers globally, and offers a broad portfolio of more than 200 products.

Actavis, the maker of the generic version of Pfizer's blockbuster cholesterol busting drug Lipitor, has a market value of $12.9 billion and generated revenue of $5.9 billion last year.

Actavis said that the acquisition would create a global specialty pharmaceutical company with annual revenues of $11 billion.

The deal will expands its portfolio and pipeline in core areas of women's health and urology, while adding gastroenterology and dermatology.

The merger is expected to generate after-tax operational synergies of more than $400 million.

 ''The combination of Actavis and Warner Chilcott creates a strong specialty brand portfolio focused in therapeutic categories with strong growth potential, and is supported by a deep pipeline of development programs,'' said Paul Bisaro, president and CEO of Actavis. 

"The combination will enhance the value of each company's portfolio and provides a substantial foundation to support the successful launch of new products over the next several years, particularly in Women's Health, including Minastrin 24 Fe, Esmya, metronidazole vaginal gel 1.5%, the progestin-only contraceptive patch and other women's health products in development from the recent acquisition of Uteron Pharma SA. It also provides an expanded portfolio of specialty products that have the potential to be commercialized in key markets outside of North America," Bisaro added.

"The Warner Chilcott team has built a powerful specialty brands business with a strong pipeline, and this compelling transaction brings together two complementary organizations with the potential to create even more value for shareholders," said Roger Boissonneault, president and CEO of Warner Chilcott.

At the close of the transaction, which is expected by year-end, Actavis and Warner Chilcott will be combined under a new company incorporated in Ireland, where Warner Chilcott is currently incorporated. 

The newly created company is expected to be called Actavis plc, or a variant.