Drugmaker Actavis Inc. flipped from hunted to hunter on Monday, May 20, announcing plans to acquire specialty pharmaceuticals company Warner Chilcott plc for $8.5 billion in stock and assumed debt.
Terms of the deal call for Parsippany, N.J.-based Actavis to pay 0.160 shares of its stock for each share of Warner Chilcott, valuing the target's shares at $20.08 apiece based on Actavis' Friday close of $125.50. The deal offers a premium of 34% to Dublin-based Warner Chilcott's closing price on May 9, the day before the companies first disclosed they were in deal talks.
Post-deal, Warner Chilcott holders would own about 23% of Actavis, which will take Warner Chilcott's Dublin address and tax rate and rename itself Actavis Plc.
Warner Chilcott brings a range of women's health, gastroenterology, urology and dermatology products to Actavis, which traditionally has focused on selling generic versions of drugs no longer covered under patents. The combined company would rank as the third-largest U.S. specialty pharmaceutical company with about $11 billion in annual sales.
"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," Actavis CEO Paul Bisaro said in a statement. "The combination is commercially and financially compelling, and reshapes the specialty pharmaceutical universe by creating a powerful global competitor."
Actavis, which until earlier this year was called Watson Pharmaceuticals Inc., was created last year when Watson acquired Swiss-based Actavis Group hf for $5.6 billion. But the company in recent months has been seen more as a potential target than a buyer, reportedly receiving takeover interest from companies including Mylan Inc., Valeant Pharmaceuticals International Inc. and Novartis AG.
Warner Chilcott, meanwhile, has been on the block for about a year. The company, which is partially owned by private equity firms Thomas H. Lee Partners LP, Bain Capital LLC and CCMP Capital Advisors LLC, is facing the expiration of patents on two key products in 2013.
Chris Seiter, Ivan Farma Peter Bell and Geoff Iles of Bank of America Merrill Lynch joined with Greenhill & Co.'s Rupert Hill as financial advisers to Actavis, while David Levin, Jason Haas, James Stynes, Arek Kurkciyan and Alberto Realuyo of Deutsche Bank AG advised Warner Chilcott. Fried, Frank, Harris, Shriver & Jacobson LLP's Philip Richter, Abigail Bomba, Richard May and Alan Kaden represented BofA Merrill Lynch and Greenhill.
Davis Polk & Wardwell LLP's Michael Davis, H. Oliver Smith, James E. Elworth, Lee Hochbaum, Ashley M. Bryant, Edmond T. FitzGerald, Gillian Emmett Moldowan, Michael Mollerus, Michael Kaplan and Joel M. Cohen advised Warner Chilcott. Arthur Cox & Co. is advising Warner Chilcott as to matters of Irish law. Latham & Watkins LLP is acting as legal counsel to Actavis.
Thomas Montag was named sole chief operating officer at Bank of America Merrill Lynch. For other updates launch today's Movers & shakers slideshow.
Andy Levine, an M&A partner at Jones Day in New York, believes that increased buying activity by Chinese companies will be a key driver of global M&A over the next decade. The Chinese have been big buyers of natural resources in Australia, Africa and South America, and Shuanghui International Holdings' purchase of Smithfield Foods last year was a sign of China's increased interest in U.S. companies. The deal stirred some protectionist rumblings in the U.S., but CFIUS approved the transaction, and Levine believes that decision is a positive sign for the future of Chinese M&A activity in the U.S. More video