RIC drugmaker Actavis, itself the subject of takeover speculation, said yesterday it would buy speciality pharmaceutical company Warner Chilcott for $5bn in stock to expand its branded drug portfolio, lower taxes and increase profits.
Warner Chilcott brings a portfolio of branded women’s health pharmaceuticals, such as the contraceptive patch to Actavis, which makes and sells drugs that are no longer under patent protection.
This is the second major acquisition in the past two years for Actavis, which competes against substantially larger companies like Teva Pharmaceuticals Industries and Mylan. The move comes after reports that Actavis was a takeover target after weeks of reports that it had spurned approaches from Canadian pharmaceutical company Valeant Pharmaceuticals International and Mylan. Analysts have said that buying Warner Chilcott would kill the chances of a takeover of Actavis.
Actavis chief executive Paul Bisaro declined to comment on the deal speculation. “I think we have remained very focused on our objectives,” Bisaro said. “We wanted to get bigger in our brand business.”
The deal also would benefit the company’s tax structure, he said.
Actavis said the deal would add 30 per cent to earnings per share in 2014, in part because it would pay lower taxes when it incorporates in Ireland, where Warner Chilcott is based.
“The longer-term benefit of a lower tax rate is that it allows you to acquire other companies at even better prices,” said BMO Capital Markets analyst David Maris. He said he expected the company to continue with more deals after digesting Warner Chilcott.
Earlier this year, Watson Pharmaceuticals changed its name to Actavis, which it bought last year.
After it buys Warner Chilcott, Actavis will retain its name and have $11bn in annual sales, up from $5.91bn in 2012.
Warner Chilcott shareholders will receive 0.16 share of the combined company. The companies said that would equate to $20.08 per share, based on Actavis’ closing share price of $125.50 on Friday.
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.