Teva Pharmaceutical Industries Ltd has entered into a definitive agreement to acquire Ratiopharm, Germany's second largest generics producer and the sixth largest generic drug company worldwide, for an enterprise value of €3.625 billion. The transaction is subject to certain conditions including relevant regulatory approvals. On a pro forma basis, the combined company would have had 2009 revenues of US$ 16.2 billion. Teva expects to complete the transaction by year-end 2010.

Commenting on today's transaction, Shlomo Yanai, Teva's president and chief executive officer, said: "This is an important acquisition for Teva. This transaction is perfectly aligned with our long-term strategy in which Europe is an important pillar and growth driver. Ratiopharm will provide us with the ideal platform to strengthen our leadership position in key European markets, most notably in Germany, as well as rapidly growing generic markets such as Spain, Italy and France."

The acquisition will position Teva as the leading generic pharmaceutical company in Europe, increasing its European business from sales of US$ 3.3 billion in 2009 to joint pro forma sales of US$ 5.2 billion. Ratiopharm's robust portfolio includes 500 molecules in over 10,000 presentation forms covering all major therapeutic areas marketed in 26 countries. Ratiopharm also has valuable know-how in biosimilars, consisting of a number of products in advanced stages of development and a well-established sales and marketing team. Ratiopharm reported worldwide 2009 revenues of €1.6 billion. The combined entity will have 40,000 employees worldwide, of which 18,000 will be based in Europe. The German headquarters site for the combined entity will be located in Ulm, Ratiopharm's current headquarters.

Following the acquisition, Teva will improve its market position in Germany, the world's second largest generic drug market valued at approximately US$ 8.8 billion (including sales to hospitals and OTC), to become the number two player in this market. The combined entity will have a strong European footprint, holding the leading market position in 10 European markets, including key markets such as the UK, Hungary, Italy, Spain, Portugal and the Netherlands as well as a top three ranking in 17 countries, including Germany, Poland, France and the Czech Republic. In addition, the transaction will nearly double Teva's sales in Canada.

Yanai continued, "We are highly impressed by the team at Ratiopharm and thrilled to be joining forces with a company we have partnered with in the past and have long respected. Teva and Ratiopharm have similar corporate cultures and share a strategic vision which makes this combination a natural fit. Together, we will be able to realize the vision of increasing patients' access to safe, high-quality, affordable medications even more quickly and deliver even more value to our stakeholders across the globe."

Hans-Joachim Ziems, managing director of Ratiopharm's pre-owner VEM Holding and manager of the bidding process, said, "The successful sale of Ratiopharm is concluded today with the combination of two great companies. We have emphasized from the beginning that the strategic concept of the integration of Ratiopharm into the acquiring company will play a critical role in the decision in addition to the purchase price. Now, we have succeeded in putting the company under the strategic umbrella of Teva as a prosperous unit, while taking into account the interests of the employees, of VEM and of the Merckle Group's creditors."

Oliver Windholz, chief executive officer of Ratiopharm, said, "For Ratiopharm, Teva is a natural fit, with its international focus and our shared generic vision. We are convinced that together we can gain enormous growth potential in all markets. Being a part of the Teva family will enable our management team and employees to continue to grow our business and fully materialize the great talent we have at Ratiopharm."

Ludwig Merckle, the representative of Ratiopharm's family owner said, "The separation of Ratiopharm is a painful step for us as the founding family. Taking this as given, I am confident that this is a good solution. Finding the best home for Ratiopharm was a vital element in this process. I believe that joining forces with the world's largest generic company will enable Ratiopharm to continue its path of growth and success."

Upon completion of the acquisition, Teva expects synergies of at least US$ 400 million (€300 million), which should be fully realized within three years. The transaction is expected to be earnings accretive within three quarters after closing, based on earnings per share according to US GAAP reporting.

The transaction will be funded through a combination of cash on hand and lines of credit.

Kirkland & Ellis LLP served as outside legal counsel for Teva and Goldman, Sachs & Co. acted as financial advisor to Teva in this transaction.