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Actavis to buy Warner Chilcott in $8.5bn deal

Combined company will have annual revenues of about $11bn

The M&A merry-go-round in the speciality pharma sector continued to spin, with Actavis announcing an $8.5bn stock-swap deal to buy Ireland's Warner Chilcott.

News of the potential merger first emerged last week, with Actavis announcing a definitive offer yesterday for the Irish drugmaker that would create a combined company with annual revenues of about $11bn.

The merger has already been approved by both companies' boards and is expected to close by the end of the year, helping Actavis continue its transformation from a straight generics player to a drugmaker with a portfolio of branded speciality medicines.

Actavis has itself been the target of merger offers in recent weeks – from Canada's Valeant Pharmaceuticals as well as a rumoured $15bn bid from Mylan – and analysts have suggested that the only thing likely to threaten the Warner Chilcott deal would be a hostile takeover for either company.

Warner Chilcott boosts Actavis speciality medicines business with brands such as recently approved Delzicol (mesalamine) for ulcerative colitis, and a growing oral contraceptive franchise that just saw its latest entrant - a chewable norethindrone acetate/ethinyl estradiol product - cleared in the US.

The combined company, which will be headquartered in Ireland for tax reasons, is expected to be called Actavis and will have speciality pharma sales of around $3bn a year. This will account for almost 25 per cent of total turnover in 2013 compared to just 7 per cent of the company at present.

The product focus will be on gastrointestinal medicines, women's health, urology and dermatology, which are all categories with "strong growth potential", according to Actavis chief executive Paul Bisaro. It will have 25 projects in R&D and 15 women's health candidates in the pipeline.

Meanwhile, the merger with Warner Chilcott will diversify Actavis' portfolio of generic drugs further after last year's €4.3bn takeover of Actavis by Watson, with the parent company subsequently taking the Actavis name.

Under the terms of the deal, Warner Chilcott shareholders will receive 0.16 shares in Actavis for each share they own, equivalent to a little over $20 apiece, and on completion will hold around 23 per cent of the new company.

21st May 2013

From: Sales



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