Concordia Healthcare Corp., a diverse healthcare company focused on legacy pharmaceutical products, orphan drugs, and medical devices for the diabetic population, has entered into a definitive asset purchase agreement to acquire substantially all of the commercial assets of privately held Covis Pharma S.à.r.l and Covis Injectables, S.à.r.l (together “Covis”) for US$1.2 billion in cash. All financial references are in US dollars unless otherwise noted.

The Covis drug portfolio being acquired (the “Portfolio”) consists of 18 branded and authorized generic products with stable revenue, strong margins and free cash flow.  The distinctive product portfolio includes branded pharmaceuticals, injectables and authorized generics that address life threatening and other serious medical conditions in various therapeutic areas including cardiovascular, central nervous system, oncology and acute care markets.  Key products are Nilandron, for the treatment of metastatic prostate cancer; Dibenzyline, for the treatment of pheochromocytoma; Lanoxin, for the treatment of mild-to-moderate heart failure and atrial fibrillation; and, Plaquenil, for the treatment of lupus and rheumatoid arthritis.

In its fourth quarter of 2014, Covis expects to have revenue between US$ 47 and US$ 52 million related to the Portfolio. Overall for 2014, Covis expects to have revenue between US$140 and US$145 million with a gross profit margin of approximately 90%.

Concordia believes that it can integrate the Portfolio it is acquiring into its existing business and leverage its existing infrastructure. Through the elimination of redundant distribution and G&A expenses, Concordia expects to recognize immediate synergies of approximately $20 million.

“Covis’ strong commercial momentum will have an immediate and material impact on our top and bottom line financial results,” said Mark Thompson, chief executive officer of Concordia. “In the longer-term, this transaction creates greater scale and diversification for Concordia, which should support the continued execution of our aggressive growth plans.”      

The acquisition is structured as an all-cash transaction with a purchase price of US$1.2 billion for the Portfolio being acquired.  The Company plans to pay for the acquisition through a mix of term loans, bonds and equity. The company has entered into a commitment letter with Royal Bank of Canada (“RBC”), pursuant to which, RBC has agreed to provide credit facilities and bridge commitments of up to US$1.6 billion (the “Credit Facilities”) to fully pay for the acquisition price and refinance all outstanding Concordia debt. The Credit Facilities are subject to a number of customary conditions. All obligations of the company under the term loans will be secured by first priority perfected security interests in the assets of the Company and the assets of and equity interests in its subsidiaries. The bridge commitments will be unsecured. The Company is targeting leverage to be below 5x at the closing of the acquisition and expects net leverage to fall to ~3x by year end 2016. The transaction is expected to be over 50% accretive to Concordia Adjusted EPS in 2015.

The acquisition, which is expected to close in the second quarter of 2015, is subject to satisfaction of customary closing conditions (including receipt of required regulatory approvals). The Board of Directors of all parties to the transaction have approved the acquisition.

RBC Capital Markets is acting as financial advisor to Concordia and Sullivan & Cromwell LLP and Fasken Martineau DuMoulin LLP are acting as Concordia’s legal counsel. Lowenstein Sandler LLP is acting as Covis’ legal counsel. Bourne Partners served as the exclusive financial advisor to Covis in the sale process.

Covis Pharma S.à.r.l. and Covis Injectables S.à r.l. are subsidiaries of Covis Pharma Holdings S.à r.l..  Headquartered in Zug, Switzerland, Covis Pharma S.à r.l. is a global specialty pharmaceutical company providing therapeutic solutions to patients which will continue operating as a speciality pharmecutical business following consummation of the transaction.