Actavis announces $25-billion Forest acquisition

The deal will be funded by cash and equity, with the combined company to be led by Paul Bisaro, chairman and CEO of Actavis

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DUBLIN and NEW YORK—Actavis plc and Forest Laboratories, Inc. have announced the signing of a definitive agreement by which Actavis will acquire Forest for approximately $25 billion, or $89.48 per share ($26.04 in cash and 0.3306 shares of Actavis stock for each share of Forest stock). The transaction price represents an approximately 25-percent premium over Forest’s stock price, and a premium of approximately 31 percent over the company’s 10-day volume weighted average stock price (as of the trading close on February 14).
“The combination of Forest with Actavis creates a specialty company with annual sales of approximately $15 billion, a diversified portfolio and a geographically balanced business,” Brent Saunders, CEO and president of Forest, commented in a statement. “This compelling combination gives us more optionality to drive future growth and sustainable shareholder value due to our expanded geographic and therapeutic presence, ability to drive new product flow through R&D, strong balance sheet and consistent cash flow. The terms of the agreement provide Forest shareholders with cash and the opportunity to participate in the future growth of our new, stronger combined company.
“Forest is a great fit with Actavis due to our strong legacy in branded specialty and primary care pharmaceuticals with a best in class commercial team, a top-notch drug development organization and a long history of successful partnerships,” he continued. “The acquisition builds on our blockbuster line call strategy in CNS and GI and dramatically extends our reach beyond the U.S. market. By joining forces with Actavis, we become more relevant to key physicians and customers through blockbuster franchises in CNS, Women’s Health, GI and Urology, as well as Actavis’ global generics business.”
The combined company is expect to see, on a pro forma combined basis for full year 2014, a CNS franchise worth roughly $2 billion, gastroenterology and women’s health franchises worth approximately $1 billion each, a cardiovascular franchise generating roughly $500 million and urology and dermatology/established brand franchises generating close to $500 million in sales each, annually.
“With this strategic combination, we create an innovative new model in specialty pharmaceuticals leadership, with size and scale, a balanced offering of strong brands and generics, a focus on strategic, lower-risk drug development, and - most important - the ability to drive sustainable organic growth,” Paul Bisaro, chairman and CEO of Actavis, said in a press release. “Bolstered by one of the deepest and most diversified product portfolios in the industry with an exceptionally strong pipeline, this transaction creates a powerful engine for generating long-term, double-digit revenue and earnings growth.
“The combination of Actavis and Forest is expected to yield double-digit accretion to non-GAAP earnings in 2015 and 2016, with significant annual free cash flow generation of greater than $4 billion in 2015, enabling us to rapidly de-lever,” Bisaro added. “The combination has the potential to realize approximately $1 billion in operating and tax synergies, before any manufacturing synergies or revenue synergies, while we anticipate continuing to invest over $1 billion per year in R&D.”
Following the close of the transaction, Bisaro will lead the combined company, and three members of the Forest board of directors will join the Actavis board. Both companies’ boards of directors have unanimously approved the transaction, which is subject to the approval of both companies’ shareholders in addition to customary regulatory approvals, including a Hart-Scott-Rodino review in the United States.
SOURCE: Forest Laboratories press release

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