Watson Pharmaceuticals Inc. has entered into a definitive agreement to acquire privately held Actavis for an upfront payment of EUR4.25 billion. As a result of this acquisition, Watson will become the third largest global generics company with 2012 anticipated pro forma revenue of approximately $8 billion.
Actavis, which as a stand-alone company was positioned for strong growth, has a commercial presence in more than 40 countries and markets more than 1,000 products globally. Actavis has approximately 300 projects in its development pipeline and manufactured more than 22 billion pharmaceutical doses in 2011. Actavis has more than 10,000 employees worldwide and had 2011 revenues of approximately $2.5 billion.
“The acquisition of Actavis will create the 3rd largest global generics company, substantially completing Watson's expansion as a leading global generics company. Actavis dramatically enhances our commercial position on a global basis and brings complementary products and capabilities in the United States,” said Paul M Bisaro, president and CEO of Watson.
“In a single, commercially compelling transaction, we more than double Watson's international access and strengthen our commercial position in key established European markets as well as exciting emerging growth markets, including Central and Eastern Europe and Russia,” Bisaro continued. “The transaction achieves Watson's stated strategic objective of expanding and diversifying our business into a truly global company. Once the transaction is completed, approximately 40 per cent of our generic revenues will come from markets outside of the US.”
“This transaction is financially compelling, accelerating Watson's top and bottom-line growth profile for the foreseeable future. It will be immediately accretive to non-GAAP earnings before synergies, and we estimate that annual synergies of greater than $300 million can be achieved within three years. Between now and closing, we will work closely with Actavis' management to prepare for a rapid and seamless integration so that Watson can maximize the benefits of this acquisition and capitalize on the significant potential to ensure long-term growth for our shareholders.”
“Today marks a milestone in the history of Actavis. For two years I have had the pleasure of working together with the newly formed Actavis management team and our stakeholders who have led the company into a new phase,” said Claudio Albrecht, executive chairman and CEO of Actavis. “We have successfully placed Actavis in a strong position to meet the future growth opportunities in the generic pharmaceutical industry.”
“Building on this strong foundation, the combination of Watson and Actavis will result in a company of the size required to position itself as a strong player in the generic pharmaceutical industry. The two companies are an ideal complementary fit that will enable the combined company to enhance its position among the industry leaders. Additionally, together Watson and Actavis will be well placed in the fast-paced and dynamic biosimilars market,” Albrecht added.
“I congratulate Watson on the acquisition of Actavis,” said Thor Bjorgolfsson, chairman of investment firm Novator, the largest shareholder in Actavis for over a decade. “Having been a part of Actavis from the time it had a turnover of EUR20 million growing to EUR2 billion has been an adventurous and fulfilling journey.”
“I saw a great opportunity in the combination of these companies and have worked relentlessly for the past several months on making it happen. We, the shareholders, are happy to take our consideration in shares of Watson common stock as we believe in the future value and growth prospects of this great combination of assets and talent. This is a dream combination in this industry,” Bjorgolfsson added.
Under the terms of the agreement, Watson will acquire Actavis for an upfront payment of EUR4.25 billion. Actavis stakeholders could also receive additional consideration, contingent upon Actavis achieving negotiated levels of certain 2012 performance targets. The contingent payment, if fully earned, would result in the delivery of up to 5.5 million shares of Watson common stock in 2013. This contingent payment was valued during the negotiations at EUR250 million, based on a per share price of $60, using a Euro to US dollar exchange rate of 1.32.
Watson intends to fund the cash portion of the transaction through a combination of term loan borrowings and the issuance of senior unsecured notes. Watson currently has bridge loan commitments from BofA Merrill Lynch and Wells Fargo Bank, N.A. pending execution of its final financing plans. Watson anticipates that the combined company will generate substantial free cash flow, enabling Watson to pay down debt quickly to below 3.0x debt to adjusted EBITDA by 2013 and to achieve a level of approximately 2.0x debt to adjusted EBITDA in 2014.
The acquisition will be subject to customary conditions, including review by the US Federal Trade Commission (FTC) under the provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act"), as well as approvals outside of the United States. Pending approvals, Watson anticipates closing the transaction in the fourth quarter of 2012.
BofA Merrill Lynch is acting as exclusive financial advisor and Latham & Watkins LLP is acting as legal advisor to Watson in connection with this transaction. Blackstone Advisory Partners and Deutsche Bank are acting as financial advisors and Linklaters and Clifford Chance are acting as legal advisors to Actavis in connection with this transaction.
Watson Pharmaceuticals, Inc. is a leading integrated global pharmaceutical company and engaged in the development, manufacture and distribution of generic pharmaceuticals and specialized branded pharmaceutical products focused on Urology and Women's Health.
Actavis is one of the world's leading generic pharmaceutical companies, specializing in the development, manufacture and sale of generic pharmaceuticals.