Amneal Pharmaceuticals, Inc. (NYSE: AMRX) and AvKARE Inc. today
announced they have entered into a definitive agreement under which
Amneal will acquire a 65.1% majority interest in AvKARE and its
related affiliate doing business as R&S Northeast
(collectively, “AvKARE”) for an implied enterprise value of $340
million. Following the close of the transaction, AvKARE will
operate on a standalone basis as an independent subsidiary of
Amneal.
AvKARE is one of the largest private label providers of generic
pharmaceuticals in the U.S. federal agency sector, primarily
focused on serving the Department of Defense (“DoD”) and the
Department of Veterans Affairs (“VA”). The company utilizes its
relationships with more than 50 generic pharmaceutical vendors to
offer a proprietary line of specially packaged products under its
own labels.
“When we re-joined Amneal as Co-CEOs in August, we outlined a
vision for our long-term strategy,” said Amneal Co-Founders and
Co-Chief Executive Officers Chirag Patel and Chintu Patel. “While
we remain extremely focused on organic growth, we also recognized
that M&A would be a key element of our growth story, and that
we would pursue the right opportunities that strategically fit our
business. And we articulated what we would look for: opportunities
to complement our existing distribution network, provide us with
defensible, durable revenue streams and, ultimately, earnings that
are accretive to ours. The AvKARE transaction meets all of these
criteria, and we are excited about the value we expect it will
create for patients, shareholders and other stakeholders.”
“The addition of AvKARE and its differentiated platform provides
a unique opportunity for Amneal to diversify our business and open
growth opportunities in the large, complex and growing federal
healthcare market,” continued Messrs. Patel. “Amneal is among the
largest generic drug companies domiciled in the U.S., and
prioritizing our American operations and customers remains a top
priority. With AvKARE, we believe Amneal will be well-positioned to
utilize our extensive U.S.-based manufacturing network to supply
products to the federal healthcare market. We look forward to
completing the AvKARE transaction and strengthening our focus on
providing affordable medicines to patients.”
“We are pleased to enter into this transaction with Amneal, a
leading provider of affordable medicines to federal agencies and
one of our long-term business partners,” said Steve Shirley, Chief
Executive Officer of R&S Northeast and Executive Vice President
of AvKARE. “We look forward to working with our entire network of
vendor partners, as well as our customers at both the VA and DoD,
and will continue to identify new opportunities in which we can
better serve government agencies. In addition, we will continue to
retain a large ownership interest in AvKARE and manage operations
with our existing leadership team as an independent subsidiary of
Amneal. We look forward to continuing to utilize our expertise in
supplying affordable generic pharmaceuticals to federal agencies
through our diverse vendor portfolio, and could not be more
passionate about entering the next chapter of our company’s
growth.”
Compelling Strategic and Financial Benefits
- Enhances Amneal’s Existing Presence in Federal Healthcare
Market. Together with AvKARE, Amneal will build upon its
existing presence in the large and growing VA and DoD generics
market. AvKARE is the second largest VA and DoD generic
pharmaceutical reseller in the country, and its dedicated focus on
the federal sector has made it a premier partner for more than 50
generic manufacturers seeking efficient access to the federal
market. In addition, this transaction underscores the existing and
future potential of Amneal’s robust U.S. manufacturing base, which
enables the sale of products to U.S. government partners.
- Management Team Brings Proven Track Record in Private Label
Products in U.S. Federal Sector. Compliance with regulations
governing federal procurement of pharmaceuticals is highly complex
and requires specialized capabilities, creating significant
barriers to entry for market entrants, including generic
manufacturers. AvKARE’s management team has more than 50 years of
collective experience and expertise providing affordable generic
pharmaceuticals to federal agency healthcare providers.
- Compelling Financial Benefits. For the twelve-month
period ended October 31, 2019, AvKARE’s unaudited consolidated
EBITDA was approximately $63 million. Following the close of the
transaction, AvKARE’s financial results will be consolidated in
Amneal’s GAAP financials, and the transaction will be immediately
accretive to Amneal’s earnings and free cash flow. On a
consolidated basis, the transaction is expected to reduce Amneal’s
Net Debt to Adjusted EBITDA leverage ratio.
Financing and Approvals
Under the terms of the transaction, Amneal will acquire its
majority interest through an unrestricted subsidiary, which will
finance the purchase of AvKARE with a new $180 million senior
secured term loan facility, approximately $75 million of balance
sheet cash and an approximately $44 million Seller Note, with the
balance of the implied enterprise value contributed through the
selling shareholders’ rollover interest in the newly formed
subsidiary. The new debt financing will be secured by the newly
formed unrestricted subsidiary and will not impact Amneal’s
existing term loan facility.
The contributed rollover interest will be retained by the
Shirley family, AvKARE’s founders, who will continue to
independently manage the operations of the business. Mr. Shirley
will continue to lead the business and will report to Chirag
Patel.
The transaction is expected to be completed in early 2020,
subject to the satisfaction of customary closing conditions and
approval from relevant regulatory agencies, including clearance
under the Hart-Scott Rodino Antitrust Improvements Act.
Advisors
SunTrust Robinson Humphrey is serving as lead arranger and
financial advisor to Amneal. BofA Securities and RBC Capital
Markets, LLC also provided financial advice. Morgan, Lewis &
Bockius LLP is serving as legal counsel to Amneal. Raymond James is
serving as financial advisor to AvKARE, and Frost Brown & Todd
is serving as AvKARE’s legal counsel.
About Amneal
Amneal Pharmaceuticals, Inc. (NYSE: AMRX), headquartered in
Bridgewater, NJ, is a fully-integrated pharmaceutical company
focused on the development, manufacture and distribution of generic
and specialty drug products. The Company has manufacturing
operations in North America, Asia, and Europe, working together to
bring high-quality medicines to patients primarily within the
United States.
Amneal has an extensive portfolio of more than 300 generic
medicines and is expanding its portfolio to include complex dosage
forms including biosimilars in a broad range of therapeutic areas.
The Company also markets a portfolio of branded pharmaceutical
products through its Specialty segment focused principally on
central nervous system and endocrine disorders. For more
information, visit www.amneal.com.
About AvKARE Inc.
AvKARE is a licensed manufacturer and wholesaler of
pharmaceuticals products. AvKARE services a diverse customer base
that includes government (federal, state and municipal) and
commercial sectors. AvKARE serves the Department of Defense,
Veterans Hospitals, NASA, TriCare, Dept. of Agriculture, Indian
Health Services, USDA, U.S. Army, Air Force, Navy, and USMC, as
well as Group Purchasing Organizations that include Amerinet,
Innovatix, Health Trust Purchasing Group, IPC, Broadlane/MedAssets
and Premier. To learn more about AvKARE, visit
https://www.avkare.com/.
Forward-Looking Statements
Certain statements contained herein, regarding matters that are
not historical facts, may be forward-looking statements (as defined
in the Private Securities Litigation Reform Act of 1995, as
amended). Such forward-looking statements include statements
regarding management’s intentions, plans, beliefs, expectations or
forecasts for the future, including, among other things, future
operating results and financial performance, expected benefits from
the AvKARE acquisition, product development and launches,
integration strategies and resulting cost reduction, market
position and business strategy. Words such as “may,” “will,”
“could,” “expect,” “plan,” “anticipate,” “intend,” “believe,”
“estimate,” “assume,” “continue,” and similar words are intended to
identify estimates and forward-looking statements. The
forward-looking statements contained in this press release include,
without limitation, statements related to the planned acquisition
and the timing and financing thereof and the expected impact of the
planned acquisition.
The reader is cautioned not to rely on these forward-looking
statements. These forward-looking statements are based on current
expectations of future events. If the underlying assumptions prove
inaccurate or known or unknown risks or uncertainties materialize,
actual results could vary materially from the expectations and
projections of Amneal Pharmaceuticals, Inc. (the “Company”). Such
risks and uncertainties include, but are not limited to: whether
and when the required regulatory approvals will be obtained,
whether and when the other closing conditions will be satisfied and
whether and when the transaction and related financing will close,
whether and when the Company will be able to realize the expected
financial results and accretive effect of the transaction, and how
customers, competitors, suppliers and employees will react to the
acquisition. A further list and descriptions of these risks,
uncertainties and other factors can be found in the Company’s most
recently filed Annual Report on Form 10-K for the fiscal year ended
December 31, 2018, as supplemented by any subsequently filed
Quarterly Reports on Form 10-Q. Copies of these filings are
available online at www.sec.gov, www.amneal.com or on request from
the Company.
Forward-looking statements included herein speak only as of the
date hereof and we undertake no obligation to revise or update such
statements to reflect the occurrence of events or circumstances
after the date hereof, except as otherwise required by United
States securities laws.
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Amneal: Todd Branning (908) 280-6019
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