Pittsburgh-based Mylan late Wednesday, Feb. 27, agreed to buy Agila for as much as $1.85 billion. Mylan will pay $1.6 billion in cash at closing and potentially up to $250 million in additional cash subject to certain unspecified conditions that Strides must satisfy.
Mylan isn't assuming any debt or acquiring any of Agila's cash through the deal. It has obtained a commitment letter from Morgan Stanley for a new $1 billion senior unsecured bridge term loan to help finance the transaction. Mylan will also use its existing credit lines and cash on hand to fund the buyout.
Both boards have approved the transaction, which is expected to close during the fourth quarter.
The deal will be immediately accretive to Mylan's adjusted diluted earnings per share when it closes.
Strides will use the proceeds to pay off debt and provide a $700 million to $800 million pre-tax return to its shareholders, the Indian company said Wednesday.
The acquisition gives Mylan one of the largest makers of injectable drugs in the world. Agila, based in Bangalore, India, produces injectable drugs including cancer therapies, antibiotics and ophthalmics. The Strides unit posted $255 million in sales and $86 million in Ebitda in 2012.
Mylan already fcosues on injectable products and believes its buyout will create a global injectables leader, while giving the company entrance into coveted high-growth international markets including Brazil. Agila has more than 300 injectables approved globally and has a presence in 70 countries.
"The addition of Agila to our existing injectables platform will immediately create a new, powerful global leader in this fast-growing market segment and accelerate our target of becoming a top-three global player in injectables," said Mylan CEO Heather Bresch in a statement.
Bresch added that Agila would further expand and diversify Mylan's portfolio of drugs, its geographic reach, and allow it to capitalize on the emerging market for biosimilars, or generic biologic drugs.
The two companies will now have more than 700 marketed injectable products and a pipeline of more than 350 others in development. Mylan CFO John Sheehan noted that Agila would nearly double its business from injectables in the first full year of integration. He added that the company still has "ample" financial flexibility to pursue other opportunities following the buyout.
Agila is rumored to have been highly sought after, with companies including Pfizer Inc., Novartis AG and others reportedly in the mix. The reason for the keen interest in Agila is the secure revenue stream that generic injectables provide while many of the world's largest producers of branded drugs deal with revenue lost from patent expirations. With more drugs such as cancer treatments going off patent, the market for generic injectables, which are difficult to produce, is increasing. Mylan noted, for example, that the market for such drugs is expected to grow at a compound annual rate of 13% through 2017.
The deal is also the third-largest acquisition of an Indian pharmaceutical entity to date, trailing only Abbott Laboratories' acquisition of Piramal Healthcare Ltd.'s healthcare solutions business ($3.72 billion) and Daiichi Sankyo Co. Ltd.'s buyout of Ranbaxy Laboratories Ltd.
The acquisition is Mylan's first buyout since July 2010, when it paid $550 million for Bioniche Pharma Holdings Ltd., also a maker of injectables.
Separately, Mylan announced its 2012 results on Wednesday, posting $1.68 billion in Ebitda on $6.8 billion in revenue.
Herbert Smith Freehills LLP is Strides' lead international counsel. Law firms DSK Legal, Haynes and Boone LLP and Pinheiro Neto Advogados also provided Strides with legal counsel.
Tommy Erdei, Dung Nguyen and Probir Rao of Jefferies & Co. were Strides' financial advisers.
A Skadden, Arps, Slate, Meagher & Flom LLP including Marie Gibson, Eric Cochran, Tim Sanders, Lorenzo Corte, Matthew Zisk, Hal Hicks, Erica Schohn, David Schwartz and Paul Doris is Mylan's legal counsel, while Slaughter and May and Platinum Partners also offered legal advice. Morgan Stanley was the buyer's financial adviser.
As part of a series of moves to buttress its reputation, post-Libor scandal, Barclays appointed a man familiar with crises, John McFarlane, as a nonexecutive director. For other updates launch today's Movers & shakers slideshow.
The New York City region has a high level of energy demand so the process is expected to be competitive. The sale price is estimated to be in the $500 million to $1 billion range. More video