Endo to acquire Par Pharmaceutical for $8 billion, expanding generics business

The combination will create a leading specialty pharmaceutical company with a generics business that is one of the industry's fastest growing and among the top five as measured by U.S. sales

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DUBLIN and WOODCLIFF LAKE, N.J.—Endo International plc and Par Pharmaceutical Holdings, Inc. today announced that they have entered into a definitive agreement under which Endo will acquire privately held Par from TPG in a transaction valued at $8.05 billion, including assumption of Par debt. The combination will create a leading specialty pharmaceutical company with a generics business that is one of the industry's fastest growing and among the top five as measured by U.S. sales, Endo stated in a release announcing the deal. It is also expected to help drive long-term double-digit revenue growth for Endo. The transaction has been unanimously approved by the boards of directors of Endo and Par, and is supported by the management teams of both companies. There are no further shareholder approvals required.
The purchase price will consist of approximately 18 million shares ($1.55 billion of value based on the 10-day volume weighted average share price of Endo ending on May 15, 2015) of Endo equity and $6.50 billion cash consideration to Par shareholders. Endo has secured fully committed financing from Deutsche Bank and Barclays to fund the cash consideration. Endo expects to implement a permanent capital structure to finance the transaction prior to the close that would include a combination of cash, debt and an equity offering.
"Our generics business, Qualitest, continues to be an extremely attractive and effective growth driver for Endo. This transaction with Par builds upon our generics growth, adding a strong portfolio of high barrier-to-entry and attractive gross margin products while also transforming Endo, creating a powerful corporate platform for future growth and strategic M&A," said Rajiv De Silva, president and CEO of Endo. "We believe the acquisition of Par underscores the continued execution of Endo's value-driven M&A strategy and helps deliver on our goal of achieving double-digit revenue growth for the overall business over the long-term. We are also excited to welcome Paul Campanelli to the Endo leadership team. With more than 25 years of experience in the generics industry and nearly 15 years at Par, Paul has demonstrated a clear track record of success in innovation and strategic management in specialty generics."
"This is an exciting time of growth and opportunity in the generics and specialty pharmaceutical arenas. Par Pharmaceutical is committed to significantly expanding our scope, capacity and capabilities to realize the maximum value of our rich and diversified product portfolio and R&D pipeline. We believe our combination with Endo best positions us to do so," said Campanelli, Par CEO. "We share Endo's goal of developing and commercializing generic drugs in areas of greatest revenue potential, complex formulations and longer life cycles. I look forward to joining the Endo team and working together to achieve that goal."
Par Pharmaceutical is a privately-held company that was acquired through a take-private transaction by an affiliate of TPG in 2012.
"Over the last three years, we have enjoyed partnering with the Par team to create a more diversified company with expanded capabilities, an enhanced product pipeline and more robust business development opportunities, all resulting in significant growth," said Todd Sisitsky, managing partner of TPG Capital North America. "The success of Par, in part, reflects our continued focus and operational expertise in the growing healthcare industry. It has been a pleasure to invest in such a great company and support Par's outstanding management team as they have grown and diversified their business. As part of Endo, Par will be well-positioned to drive future growth and we look forward to continuing to participate in the company's next chapter of success."
The Par portfolio includes nearly 100 products in multiple dosage forms and delivery systems, including oral solids, oral suspensions, injectables and high barrier-to-entry products. This portfolio is highly profitable with increasing adjusted gross margins. The transaction is also expected to help drive double-digit growth for Endo's overall business, expanding the company's corporate scope, size and future M&A potential.
Par also offers a pipeline consisting of more than 200 Abbreviated New Drug Applications (ANDAs), 115 of which were filed with the U.S. Food and Drug Administration as of December 31, 2014. Approximately 33 percent of the filed ANDAs are potential first-to-file or first-to-market opportunities and 75 percent of the overall development portfolio consists of Paragraph IV and first-to-file programs—all of which could provide a period of market exclusivity if approved. It is expected that the Par R&D pipeline could generate approximately 20 to 25 ANDA filings each year in 2015, 2016 and 2017.
Given the complementary nature of the companies' generics portfolios and operations, Endo estimates the transaction will generate $175 million in operational and tax synergies that are expected to be realized within the first 12 months following the completion of the transaction, while strategically preserving investment in the R&D pipeline to help drive long-term organic growth.
Following completion of the transaction, Endo expects to have an even stronger financial profile with enhanced cash flow and improved financial flexibility to continue to execute on its corporate strategy. The transaction is expected to be accretive to adjusted diluted earnings per share (EPS) within the first 12 months after transaction close and result in double-digit accretion to adjusted diluted EPS in full year 2016. For 2016, Endo anticipates that EBITDA generated by Par will translate into a transaction multiple of approximately 10 to 11 times pro forma adjusted EBITDA on a post-synergized basis.
Endo has secured fully committed financing from Deutsche Bank and Barclays and intends to fund the cash consideration through a combination of cash, debt and an equity offering. This financing combination provides the ability for Endo to rapidly de-lever back to the three to four times net debt to EBITDA range in the 12 to 18 months following the close of the transaction. The structure also allows for future financial flexibility and continued execution of Endo's M&A strategy.
The transaction is expected to close in the second half of 2015 and is subject to regulatory approval in the U.S. and certain other jurisdictions, as well as other customary closing conditions.
Barclays, Deutsche Bank, and Houlihan Lokey acted as financial advisors to Endo. JP Morgan acted as financial advisor to Par and its shareholders. Skadden, Arps, Slate, Meagher & Flom, LLP were Endo's legal advisors and Ropes & Gray, LLP acted as legal advisors to Par and its shareholders.
Endo develops, manufactures, markets and distributes quality branded pharmaceutical and generic pharmaceutical products as well as over-the-counter medications though its operating companies. Endo has global headquarters in Dublin, Ireland, and U.S. headquarters in Malvern, PA.
Par Pharmaceutical offers a line of high-barrier-to-entry generic drugs, while Par Specialty Pharmaceuticals provides niche, innovative brands. Par Sterile Products develops, manufactures and markets both branded and generic aseptic injectable pharmaceuticals.
TPG is a leading global private investment firm founded in 1992 with over $67 billion of assets under management and offices in San Francisco, Fort Worth, Austin, Dallas, Houston, New York, Beijing, Hong Kong, London, Luxembourg, Melbourne, Moscow, Mumbai, Sao Paulo, Shanghai, Singapore and Tokyo. TPG has extensive experience with global public and private investments executed through leveraged buyouts, recapitalizations, spinouts, growth investments, joint ventures and restructurings. The firm has a strong history of healthcare investing and its well-known investments include Aptalis, EnvisionRX, Fenwal, Healthscope, IASIS Healthcare, Immucor, IMS Health, Quintiles Transnational and Surgical Care Affiliates.

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