Watson, Actavis To Unveil EUR4.5 Billion Merger Deal Wednesday
April 24 2012 - 8:26AM
Dow Jones News
Watson Pharmaceuticals Inc. (WPI) Wednesday will announce it's
buying Swiss rival Actavis, in a EUR4.5 billion deal that will
advance the U.S.-based group up the global rankings of generic drug
makers, several people familiar with the matter told Dow Jones
Newswires Tuesday.
"The deal will be announced Wednesday," one of the sources
said.
As Actavis totaled roughly EUR300 million in earnings before
interests, taxes, depreciation and amortization in 2011, the
transaction values the company between 14 to 15 times its EBITDA,
which exceeds multiples of 10 to 12 times the EBITDA in recent
industry take-overs.
Watson of Parsippany, N.J., will pay EUR4.25 billion upfront and
another EUR250 million provided Actavis reaches specific
milestones, the person added. The transaction will enable Watson to
achieve annual synergies of over $300 million from the third year
on, the person said.
The deal will allow US-focused Watson to expand its
international footprint and become the world's third-largest maker
of generic drugs behind Israel-based Teva Pharmaceutical Industries
Ltd. (TEVA) and Swiss drug giant Novartis AG's (NOVN.VX) unit
Sandoz. Current third largest is U.S.-based competitor Mylan Inc
(MYL).
Watson has received a bump from sales of no-name drugs like the
generic version of Lipitor. But like a lot of generic drug makers,
the company is trying to diversify ahead of the anticipated impact
from drug patent expirations over the next few years.
Watson has therefore been trying to expand globally. Last year,
it bought Greek generic drug maker Specifar Pharmaceuticals SA for
EUR400 million and an Australian unit of Strides Arcolab Ltd. for
A$375 million ($391 million). Its 2011 revenue was $4.6
billion.
Actavis was taken private in 2007 by Icelandic billionaire Thor
Bjorgolfsson's private-equity firm Novator in a roughly $5 billion
deal. The chunk of the leverage buyout loan came from German lender
Deutsche Bank AG (DBK.XE). Actavis then went on an acquisition
spree, snapping up generic-drug companies all over the world,
building a big debt load in the process.
Deutsche Bank reportedly took charge at Actavis when a big chunk
of Mr. Bjorgolfsson's wealth was wiped out in late 2008 through the
collapse of Icelandic bank Landsbanki Islands hf, making a
restructuring of Actavis debt necessary.
Although details of Actavis's current ownership structure are
unclear, Deutsche Bank now owns a preferred-share stake, a person
familiar with the matter told Dow Jones Newswires earlier.
Germany's biggest bank has already written down EUR457 million
on its exposure to Actavis in 2011 and is said to take another hit
in the first quarter.
On the flip side, analysts assume Deutsche can free up around
EUR400 million in equity it had to keep to cover its exposure to
Actavis.
By Eyk Henning, Dow Jones Newswires, +49 (0)69 29725 108;
eyk.henning@dowjones.com
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