Watson Pharmaceuticals, Inc has completed the acquisition of Arrow Group for a combination of cash and stock. The purchase creates a financially strong, global specialty pharmaceutical company with over US$ 3 billion in annual revenues and operations in more than 20 countries.

"There are several significant benefits to Watson shareholders as a result of this financially smart transaction. Watson gains a financially strong and profitable company; an expanded global commercial presence; an expanded portfolio of marketed products; a stronger combined product pipeline with access to substantial biopharmaceutical capabilities; and a geographically complementary manufacturing and distribution infrastructure that can be efficiently integrated into Watson's global supply chain," said Paul Bisaro, president and chief executive officer of Watson.

Watson acquired the Arrow Group for a cash payment of US$ 1.05 billion, and the issuance of 16.9 million shares of Watson common stock. Additionally, US$ 200 million in the form of zero-coupon, non-convertible preferred shares was placed in escrow for the benefit of the Arrow shareholders. The preferred shares will be mandatorily redeemable in 2012. The cash portion of the transaction was funded using cash on hand and borrowings of US$ 275 million under the company's US$ 500 million revolving credit facility. Borrowings under the revolving credit facility bear interest at LIBOR plus 0.75 per cent. Shareholders of the parent of the Arrow Group will also receive additional contingent payments based on sales of the authorized generic version of Lipitor (atorvastatin). Tony Tabatznik, one of the founders and a director of Robin Hood Holdings Limited, the parent of Arrow Group, joins Watson's Board of Directors as a non-employee director.

"Due to the modest amount of additional debt needed to complete this transaction, we will continue to have flexibility to be opportunistic in business development initiatives for both our Generics and Brand businesses," Bisaro continued. "As previously announced, we expect the acquisition to be accretive to cash earnings per share in 2010 before synergies."

"The combination of these two highly successful companies with complementary geographies results in a company with strong commercial positions in such established markets as the US, Canada, the UK, and France; a sound platform for growth in such solid markets as Australia, New Zealand, Brazil, Scandinavia and Germany; and opportunities for success in emerging markets of Central and Eastern Europe, Turkey, Japan and South Africa," Bisaro continued. "We also benefit from the Arrow management team's significant international legal/IP and regulatory expertise and an excellent record of patent challenge successes in multiple countries," Bisaro concluded.

Founded in 2000, Arrow Group has been one of the fastest growing generic pharmaceutical companies in the world, growing from US$ 18 million in revenue in 2001 to more than US$ 650 million in 2008 (CAGR of 67%). Over the past seven years, Arrow has invested more than US$ 320 million in product research and development and markets more than 100 molecules, including more than 50 internally developed products. Arrow's product development activities are supported by state-of-the-art R&D centers in Melbourne, Australia and Toronto, Canada. As a result of the acquisition, Watson also acquires a 36 per cent ownership interest in Eden Biodesign, a company which provides development and manufacturing services for early-stage biotech companies, which will provide a long-term foundation for generic biologics.

Watson will now have approximately 6,000 employees around the world. Arrow employs approximately 1,000 people, the majority of whom work in Europe. The company has more than 260 people in technical and R&D positions, with approximately 400 of Arrow's employees directly involved in the manufacturing, packaging and distribution of products. More than 100 employees support sales and marketing in developed and emerging markets.