Mylan Laboratories Inc and King Pharmaceuticals Inc, two S&P 500 companies have signed a definitive agreement under which Mylan will acquire King in a stock-for-stock transaction, creating the nation's leading diversified specialty pharmaceutical company, a release from Mylan said.
Under the terms of the agreement, King shareholders will receive 0.9 Mylan common shares for each outstanding King common share. Based on the closing price of Mylan's stock on July 23, 2004, the total market value of this transaction is approximately $4.0 billion, or $16.659 per King share.
Upon completion of Mylan's acquisition of King, current Mylan shareholders will own approximately 56 per cent of the outstanding common shares of Mylan, and King shareholders will own approximately 44 per cent. The transaction is anticipated to close by the end of calendar year 2004 and will be tax-free to shareholders of both companies. The transaction is subject to regulatory approvals, customary closing conditions and approval by the respective companies' shareholders. The board composition of Mylan will remain unchanged, the release said.
The combination will unite Mylan's core strengths in manufacturing, science, compliance and intellectual property management, with King's well-developed sales and marketing infrastructure and business development expertise in acquiring brand products and companies.
For the twelve months ended March 31, 2004, the combined company would have had approximately $3 billion in revenues, approximately $650 million in operating cash flow and nearly 6,000 employees, with a combined sales force of almost 1,400 representatives. In addition to reporting GAAP earnings per share, upon closing, Mylan will report on a cash earnings basis, which would exclude the amortization of intangible assets from earnings per share, the release said.
As previously announced, both Mylan and King independently stopped providing financial guidance. Therefore, the companies will not be discussing the financial impact of the acquisition on a prospective basis. However, based on Mylan's and King's earnings (excluding King's special items) for the twelve months ended March 31, 2004, the acquisition would have been approximately 15 per cent accretive on a cash EPS basis.
"This transaction combines the number one domestic generic pharmaceutical company and a leading branded specialty pharmaceutical company with highly complementary platforms, and creates the second largest pharmaceutical company based on the number of US prescriptions dispensed," said Mylan Laboratories' vice chairman and CEO, Robert J. Coury. "The significant expansion of our branded business advances our long-term strategy, and we are confident that combining the fundamental strengths and assets of our two companies will result in the potential for greater growth for all shareholders," he added.
"We are extremely excited about this outstanding combination," said Ted G. Wood, Chairman of King Pharmaceuticals. He continued, "Our shareholders will receive superior value and the opportunity to participate in the upside potential of a stronger, well-diversified company. For our employees, we believe that the combination will result in attractive career opportunities as the new organization continues to grow. We anticipate a rapid and smooth integration of our two businesses."
A significant component of the transaction's value to Mylan is King's experienced cardiovascular sales force, which currently markets Altace, a leading ACE inhibitor for hypertension and cardiovascular protection. Altace had approximately $450 million in sales for the twelve months ended March 31, 2004.
The combined sales force will provide a much stronger branded platform from which Mylan plans to launch what it considers a unique hypertension product, nebivolol, the NDA for which was recently accepted for filing by the FDA. In addition, Mylan is obtaining King's robust product line, which includes three additional products, each generating over $100 million in sales for the twelve months ended March 31, 2004, specifically, Skelaxin, Thrombin and Sonata.
"This transaction makes tremendous strategic and financial sense for both companies by bringing together two strong and complementary business models," said Brian A Markison, president and CEO of King Pharmaceuticals.
"King has extensive expertise in the promotion and marketing of branded pharmaceutical products, most notably our flagship product, Altace, which we believe has continued growth potential. This is a perfect fit with Mylan, the largest US producer of generic pharmaceuticals with its own growing pipeline of proprietary products, most notably nebivolol. The opportunity to launch nebivolol will significantly expand the existing cardiovascular franchise," Brian said.
Merrill Lynch & Co Inc acted as exclusive financial advisor and Skadden, Arps, Slate, Meagher & Flom LLP acted as legal advisor to Mylan in this transaction. Goldman, Sachs & Co. acted as exclusive financial advisor and Cravath, Swaine & Moore LLP acted as legal advisor to King.