GI-oriented company Axcan Holdings to buy out specialty pharma Eurand for $583M

The combined company is expected to have an enhanced presence in the specialty pharmaceuticals sector

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BRIDGEWATER, N.J.—Under a deal announced Dec. 1, Axcan Holdings Inc., a pharmaceutical company focused on the treatment of gastrointestinal disorders, will acquire all the outstanding shares of Amsterdam, The Netherlands-based Eurand N.V., a global specialty pharmaceutical company, for $12 per share in cash. The fully diluted equity value of the transaction is approximately $583 million. Under the terms of the agreement, it is anticipated that a wholly-owned subsidiary of Axcan will shortly commence a tender offer for all of the outstanding shares of Eurand.

The independent directors of Eurand, composed entirely of non-management, non-majority-shareholder directors, acting on behalf of the Eurand board of directors, have unanimously approved the acquisition agreement and recommend that Eurand shareholders tender their shares into the offer. The transaction is expected to close in the second quarter of 2011.

"We are excited about the significant benefits this transaction delivers to stockholders, employees and customers of both organization," says Dr. Frank Verwiel, president and CEO of Axcan, who says the combined company will have an enhanced presence in the specialty pharmaceuticals sector. "Through combining the organizations, we look to create a new organization with an enhanced product portfolio, broader geographic reach, a robust research and development pipeline, innovative pharmaceutical development and manufacturing platforms, and a world-class sales force."

 "The last several years have seen Eurand evolve from being a license and development, drug formulation company into a fully integrated, specialty pharmaceutical business with the development and launch of Zenpep," says Gearoid Faherty, chairman and CEO of Eurand, referring to the company's drug for treating pancreatic insufficiency due to cystic fibrosis or other conditions, which was approved in August 2009. "I am very proud of the achievements of the Eurand team and this transaction shows the attractiveness of the business that we have created."

However, "After an extended auction process, and in conjunction with its independent financial and legal advisors, the Board of Directors has concluded that this agreement is in the best interests of our shareholders and other stakeholders," adds Angelo C. Malahias, chairman of Eurand's special committee consisting of the independent directors.

Faherty will remain chairman and CEO of Eurand through the end of 2010. At that time, John J. Fraher, currently chief commercial officer of Eurand, will become CEO and Malahias will become non-executive chairman.

The transaction is subject to a condition that a minimum of 80 percent of Eurand shares be tendered, as well as receipt of antitrust approval. To reach the 80 percent threshold, a majority of the shares held by shareholders other than Faherty and affiliates of Warburg Pincus will be required to be tendered. Affiliates of Warburg Pincus, which own approximately 55 percent of Eurand's outstanding shares in the aggregate, and Faherty, who owns approximately 3.7 percent of Eurand's outstanding shares in the aggregate, have entered into agreements pursuant to which they will tender their shares into the offer.

If the initial offering period of the tender offer is successfully completed, Axcan will provide for a subsequent offering period of at least 10 business days to allow shareholders to tender any shares not tendered during the initial offering period. Holders of Eurand shares not tendered during the offer or the subsequent offering period will receive $12 per share in cash, less applicable withholding taxes, for each untendered share, pursuant to a liquidating distribution or another transaction implemented by Eurand.

Eurand is a specialty pharmaceutical company that develops, manufactures and commercializes enhanced pharmaceutical and biopharmaceutical products based on its proprietary pharmaceutical technologies. Including Zenpep, Eurand has had six products approved by the FDA since 2001 and has a pipeline of product candidates in development for itself and its collaboration partners. Its technology platforms include bioavailability enhancement of poorly soluble drugs, custom release profiles and taste-masking/orally disintegrating tablet.

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