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Watson Pharmaceuticals buys Australian generics group

by Andrew Bulkeley  |  Published January 24, 2012 at 8:45 AM
Making good on a two-week-old promise to bolster its generics business through acquisitions, Watson Pharmaceuticals Inc. on Tuesday, Jan. 24 bought Ascent Pharmahealth Ltd. from India's Strides Arcolab Ltd.

Watson, of Parsippany, N.J., said it would pay A$375 million ($392 million) for Ascent. The deal will enable Watson to become Australia's fifth-largest generics company and add operations in Singapore, Malaysia, Hong Kong, Vietnam and Thailand.

"We are committed to expanding our international commercial operations into geographies where we can capitalize on our existing assets and participate in growing and emerging markets," Watson CEO Paul Bisaro said in a statement.

The acquisition comes just weeks after Bisaro told a healthcare conference in San Francisco that his company was "one or two large transactions" from where he wanted the company to be in generics. The company only made one purchase last year, also in generics - it picked up Greece's Specifar Pharmaceuticals SA for $561.8 million.

Watson is buying 94% of Ascent from Bangalore-based Strides and another 6% interest from Ascent CEO Dennis Bastas. It used existing cash and a revolving credit facility to pay for the acquisition, which closed at signing, Watson said.

Ascent had sales of about A$150 million last year and employs 300 in Australia and Southeast Asia. The target has 14% of the A$12 billion Australian generics market, according to Watson. The U.S. buyer said the market for generics in Southeast Asia is worth A$4 billion and growing at 8% annually.

Ascent ascended from the 2008 merger of Strides' Australian and Southeast Asian activities with Genepharm Australasia Ltd. Ascent first bought 17.7% of Genepharm for A$15 million and then received an additional 44% stake in return for its Australian and Southeast Asian assets, which were valued at A$65 million.

It mopped up the remaining 32% in 2010.

The Indian company is selling certain generics lines to focus on its more lucrative cancer-fighting generics, which have already landed it a distribution agreement with pharmaceuticals heavyweight GlaxoSmithKline plc. Last year it also agreed to supply about 40 generic injectables - including oncology drugs - to Pfizer Inc. for sale in the U.S.

Proceeds from the sale of Ascent will about halve Strides' 24 billion rupees ($479.9 million) in debt, according to Dow Jones.

The sale pushed Strides shares up 17.4%, or Rs70.95, to Rs478.30 Tuesday. Jefferies International Ltd. bankers Tommy Erdei, Dung Nguyen and Probir Rao acted as financial adviser to Strides, while Middletons, Herbert Smith LLP and DSK Legal provided counsel.

Tags: Ascent Pharmahealth Ltd. | M&A | pharmaceuticals | Strides Arcolab Ltd. | Watson Pharmaceuticals

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