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Pliva says yes to 2.2bn Barr offer

US firm set to gain an important European foothold in rapidly consolidating generics sector

US generics firm, Barr Laboratories, appears to have won the bidding war for rival, Pliva, after the board of the Croatian firm endorsed its $2.2bn cash offer.

Pliva, the largest central and eastern European drug manufacturer by sales, said it had backed Barr's offer of K705 ($122.3) per share, with investors all receiving Pliva's proposed 2005 annual dividend of K12 a share.

The auction was triggered by Icelandic generics company, Actavis, whose initial $1.6bn bid for Pliva was rejected in March. Actavis later raised its bid to just over $2bn and remained a frontrunner in the bidding war.

Barr's offer is significantly higher than Actavis' last publicly made bid and represents a 38 per cent premium to Pliva's closing share price on March 16, the day before it said it had received a takeover bid approach from Actavis.

Analysts said Barr had offered a fair price for Pliva.

ìI think what Barr offered is a fair value,î analyst Bernd Maurer at Raiffeisenbank told Reuters. ìIt's even slightly higher than what we expected and I don't think there will be any higher bids.î

Other commentators said they could not rule out any slightly higher counterbids in the range of between K730 and K750.

Rapid consolidation is currently the name of the game in the generics sector, as major players on both sides of the Atlantic seek out both improved economies of scale and global expansion.

The Pliva acquisition is Barr's first overseas acquisition and will give it a useful foothold in Europe, which is emerging as a useful arena in the development of generic forms of biotechnology medicines.

Barr and Pliva have been working together since March 2005 on the development of a generic version of Amgen's bioengineered protein, Neupogen, which stimulates white blood cell production and is used in the treatment of cancer patients.

ìThis combination will redefine Barr's potential for success by significantly lowering the cost structure that Barr faces as a stand-alone, US-based company,î said Barr's chairman and chief executive officer, Bruce Downey.

Pliva CEO, Zeljko Covic, said the firm's board had ìassessed the whole range of options available to the company, including that of remaining a standalone business, and have concluded that Barr's proposal maximises value for all Pliva shareholdersî.

Barr said it intends to launch a tender offer for Pliva shares later this year, once it has gained regulatory clearance by US, Croatian and German regulators.

30th September 2008

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