Actavis to Take Over Warner Chilcott in Deal Valued at $8.5B
By Randy Osborne
Actavis Inc.’s move to acquire Warner Chilcott plc in a stock-for-stock transaction worth about $8.5 billion would create the world’s third-largest specialty pharma firm, with about $11 billion in combined annual revenues. The deal is expected to close by the end of the year.
News of the plan follows word a week ago that generic drug maker Actavis had entered “early stage” discussions with Warner, though neither company would comment further at the time. RBC Capital Markets analyst Shibani Malhotra noted that Warner’s domicile in Ireland could represent, among other things, a wise tax strategy, given the lower rate in that country.
The deal would also expand Actavis’ portfolio and pipeline in women’s health and urology, while adding gastroenterology and dermatology franchises.
Under the terms, Warner shareholders would receive 0.160 shares of Actavis for each Warner share they own: a value of $20.08 per Warner share, based on Actavis’ closing share price (NYSE:ACT) of $125.50 on May 17. This is a 43 percent premium, compared to Warner’s average trading price (NASDAQ:WCRX) of $14 for the 30-day trading period that ended May 9 (the day before Warner disclosed it had begun talks with Actavis), and a 34 percent premium to the Warner closing share price on May 9 of $15.01.
Based on the closing prices of both firms on May 9 ($106.81 for Actavis and $15.01 for Warner) the value per Warner share would be $17.09, a premium of 14 percent over the Warner closing price. When it’s all over, Warner stockholders would own about 23 percent of the “new” Actavis. Warner’s $3.5 billion in debt would become Actavis’.
Earlier, Actavis had explored a takeover by Valeant Pharmaceuticals International Inc., of Montreal (which also would have offered a tax advantage), but the deal did not pan out. Actavis recently entered an agreement with Valeant under which Actavis markets and distributes a generic version of Valeant's Zovirax ointment (acyclovir 5 percent) for herpes. Actavis came about through a merger of a U.S. and an overseas firm, too. In April 2012, Watson Pharmaceuticals Inc. merged with Actavis Group, of Zug, Switzerland, for an upfront payment of €4.25 billion (then US$5.6 billion).
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