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Warner Chilcott admits takeover talk

by Andrew Bulkeley | Published April 30, 2012 at 3:15 PM

Irish pharmaceutical company Warner Chilcott plc confirmed Monday, April 30, that it was considering its strategic alternatives after investors sent its shares soaring for a second day amid speculation the private equity-backed company was in takeover talks.

The stock gained 16.5%, or $3.10, to $21.89, in morning Nasdaq trade -- following a 7.9% Friday rise -- valuing the company at about $5.4 billion.

"The board of Warner Chilcott confirmed today that it is conducting a process to explore a broad range of strategic alternatives to enhance shareholder value, which include preliminary discussions with potential offerors. These discussions are at a preliminary stage and may or may not lead to an offer for the company," Warner Chilcott said.

In February it said it was being investigated by the U.S. Attorney's Office in Massachusetts for marketing practices. The company also faces pressure from the Food and Drug Administration to improve its Puerto Rican manufacturing plants after it released weak versions of its Ovcon endometriosis treatment several years in a row.

Dublin-based Warner Chilcott would be a perfect fit for Bayer AG, Cantor Fitzgerald & Co. analyst Irina Rivkind said in a note, following a Times of London report that the German pharmaceutical giant was readying a $32 per share run at its Irish rival.

Bayer couldn't be reached for comment.

Goldman Sachs Group Inc. is helping Warner Chilcott find a buyer but the Irish company may instead pay a special dividend to shareholders, Bloomberg News reported, citing unnamed sources.

Warner Chilcott is partly owned by Thomas H. Lee Partners LP, Bain Capital LLC and CCMP Capital Advisors LLC after the firms in early March sold some shares in a secondary stock offering, lowering their combined stake from 39.9% to 30.6%.

The financial investors, together with DLJ Merchant Banking Partners, spent $815 million as part of a $3.15 billion leveraged buyout of Warner Chilcott in 2005. The companies took it public in 2006 and DLJ exited completely in late 2010.

But analysts have said the company's $3.9 billion in debt, looming patent losses and competitive pressures make it an unlikely takeover target for financial investors.

Drugmakers the world over are making acquisitions to expand their geographic footprints and defend against the looming loss of patents. Watson Pharmaceuticals Inc., of Parsippany, N.J., last week agreed to buy Swiss generics maker Actavis Group hf for €4.25 billion ($5.6 billion), and in September, Japan's Takeda Pharmaceutical Co. Ltd. closed its €9.6 billion acquisition of Switzerland's Nycomed International Management GmbH.

Warner Chilcott last year posted $2.7 billion in revenue, down from nearly $3 billion in 2010, and earned profit of $171.1 million, a slight improvement over 2010. Its main products are Actonel, a treatment for osteoporosis (recently extended patent protection could expire in 2013); Asacol for colitis (patent expires in 2013) and birth control pill Loestrin 24 FE (off-patent in July 2014).

The company said it will report first-quarter financial results on Friday.

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