The Deal: Actavis Extends Gains Following Warner Deal
NEW YORK (TheDeal) -- Actavis Inc.'s $8.5 billion deal for specialty pharmaceutical company Warner Chilcott plc will serve to enhance the New Jersey drugmaker's revenue mix and balance sheet, and heighten its profile for future dealmaking, executives said on a conference call Monday.
Actavis added 2.3% on Tuesday to $130.08 while Warner jumped 3.8% to $20.34.
"It augments our specialty brand business in our core therapeutic market categories of women's health and urology, as well as expanding into the gastrointestinal sectors, new therapeutic qualities for us," Actavis CEO and president Paul Bisaro said on a conference call on Monday. "The combined company is going to be in the top 20 of global pharmaceutical companies in terms of sales with a substantial presence in both generics and brand products."
Before the deal, about 7% of Actavis' revenue came from branded specialty products; it mostly focused on generic drugs. Post-deal, about 25% of revenue will come from specialty products, according to comments on the call.Higher revenue means increased cash flow and more access to financing for deals, Bisaro noted. "[The deal] creates a platform for further growth, and allows for substantial deleveraging of the new entity, so it enhances our borrowing capacity. The branded and generic mix allows us to become a more balanced revenue generator. Opportunities will be presented to us because of our size and scale." After the purchase closes, Warner Chilcott holders would own about 23% of Actavis, which will take Warner Chilcott's Dublin headquarters and tax rate and rename itself Actavis plc. Terms of the deal call for Parsippany, N.J.-based Actavis to pay 0.160 shares of its stock for each share of Warner Chilcott, valuing the target's shares at $20.08 apiece based on Actavis' May 17 close of $125.50. The deal offers a premium of 34% to Warner Chilcott's closing price on May 9, the day before the companies first disclosed they were in deal talks. The target was partially held by private equity firms Thomas H. Lee Partners LP, Bain Capital LLC and CCMP Capital Advisors LLC. Warner Chilcott employs about 2,100 people, 1,500 of which are based in the U.S., Puerto Rico and Canada. The business also operates manufacturing facilities in Northern Ireland and Germany.
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