Actavis, Inc. (ACT) and Warner Chilcott Plc. (WCRX) Monday announced a definitive agreement for Actavis to acquire Warner Chilcott in a stock-for-stock transaction valued at $8.5 billion to create a leading global specialty pharmaceutical company.
Media reports had indicated last week that Parsippany, New Jersey-based Actavis spurned a $15 billion cash and stock acquisition offer from rival Mylan, Inc. (MYL), and instead decided to pursue a deal to acquire Irish drug maker Warner Chilcott.
As per the agreement announced today, Warner Chilcott shareholders will receive 0.160 shares of New Actavis for each of their shares, which equates to $20.08 per Warner Chilcott share based on Actavis' closing share price of $125.50 on May 17.
This represents a 43 percent premium to Warner Chilcott's volume-weighted average trading price of $14 for the 30-day trading period ending on May 9, the day before the firm disclosed it was engaged in preliminary discussions with Actavis. The offer marks a 34 percent premium to Warner Chilcott closing share price on May 9.
The transaction is expected to be tax-free, for U.S. federal income tax purposes, to Warner Chilcott shareholders. Actavis shareholders will receive one share of New Actavis for each of their Actavis shares. The transaction will be taxable to Actavis shareholders.
After closing, Warner Chilcott shareholders are expected to own around 23 percent of New Actavis. Shares of New Actavis are expected to trade on the New York Stock Exchange under the ticker symbol ACT.
The transaction is expected to close by the end of 2013. The transaction is expected to be more than 30 percent accretive to Actavis' non-GAAP earnings per share in 2014, including expected synergies.
When the deal is done, Actavis and Warner Chilcott will be combined under a new company incorporated in Ireland, where Warner Chilcott is currently incorporated. The newly created company, expected to be called Actavis Plc or a variant thereof, will be led by the current Actavis leadership team.
Paul Bisaro, president and CEO of Actavis, said, "The combination is commercially and financially compelling, and reshapes the specialty pharmaceutical universe by creating a powerful global competitor.''
The combination is estimated to have around $11 billion in annual revenue. It will be the third-largest U.S. specialty pharmaceutical company with about $3 billion in annual revenues focused on core therapeutic categories of Women's Health, Gastroenterology, Urology and Dermatology.
The combined entity is expected to provide a firm foundation to support the launch of new products over the next several years, particularly in Women's Health. This includes Minastrin 24 Fe, Esmya, metronidazole vaginal gel 1.5%, the progestin-only contraceptive patch and other women's health products in development from the recent acquisition of Uteron Pharma SA.
The proposed transaction has been unanimously approved by the Boards of Directors of both companies, and is supported by their management teams.
ACT closed at $125.50 on Friday and is gaining 2.8 percent in pre-market trading on Monday.
WCRX settled at $19.20 on Friday and is advancing 2.9 percent in pre-market activity.
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