Actavis Group, an international generic pharmaceuticals company, has submitted an improved proposal to PLIVA and has served a notice of intention to publish a public offer under Croatian Takeover Law.

Under the terms of Actavis' improved proposal, PLIVA shareholders will receive HRK(Croatian currency) 723 per share in cash, in addition to the HRK 12 per share dividend as requested by PLIVA, representing a total cash payment of HRK 735 per share, which corresponds to a value of US$2.3 billion. The financing required for this improved proposal is fully committed and will be arranged by JP Morgan, HSBC and UBS. The financing will consist of a mixture of loan facilities and a preferred security.

The decision to increase the offer price follows Actavis' due diligence review which identified greater potential synergies than previously anticipated. The merger would create the third largest generics company in the world with the critical mass and global reach to compete with the largest industry players, as per Actavis.

As per Actavis' proposal, it intends to retain the PLIVA name in Croatia and to transfer production to Croatia from existing sites in various countries, enhancing its low cost manufacturing capabilities and creating more opportunities for management and employees in Croatia. Actavis also intends to enhance the research and development capabilities of PLIVA in Croatia and make use of PLIVA's current infrastructure to manage a large and important part of the business of the new Group. Actavis has integrated over 20 acquisitions in the last seven years.

PLIVA confirmed that it has received formal notification from Actavis Group of its intention to publish an offer for all shares carrying voting rights of the company, in accordance with the requirements of article 5(2) of the Croatian Takeover Law, in which it discloses a total current shareholding of 1,772,403 ordinary shares or 10.05 per cent of total outstanding PLIVA shares.

PLIVA noted Actavis' announcement on June 29, 2006 of a proposal to offer to PLIVA shareholders HRK 723 per share (in addition to the proposed HRK 12 dividend for a total cash consideration of HRK 735 per share) and disclosure that it has also entered into call option agreements over GDRs equivalent to 1,894,650 PLIVA shares representing 10.7 per cent of PLIVA's outstanding share capital.

PLIVA also noted that Actavis has said that these option agreements together with shares held directly and indirectly, give Actavis control over more than 20 per cent of outstanding PLIVA shares. Furthermore, PLIVA noted that Actavis' formal notification provides no details regarding these option agreements, including the strike price and premium paid for the options or the conditions upon which the options are exercisable or lapse.

PLIVA continues to advise shareholders to take no action in respect of their shares in PLIVA until publication of the offers made by Barr and Actavis. PLIVA notes that both transactions announced by Barr and Actavis present potential antitrust issues that will need to be resolved with the US antitrust agencies prior to launch of a formal offer. PLIVA believes that such issues are capable of satisfactory resolution in both cases and that the time required for such resolution is likely to be similar for each.