TEL AVIV: Teva Pharmaceutical Industries has agreed to buy Allergan Plc’s generic drugs business for $40.5bn in a cash and stock deal that will turn the Israeli company into one of the world’s largest pharmaceutical firms.
The deal, the largest in Israel’s corporate history, prompted Teva to drop its $40bn hostile bid for Mylan, which used a poison pill-style defence to fight the takeover.
It also will allow Dublin-based Allergan, which combined with generics maker Actavis earlier this year in a $66bn deal, to focus on branded drugs and pay down its debt. “Allergan’s business is more high-end (than Mylan). It’s a more interesting business ... a profitable business and it’s well managed,” said Gilad Alper, an analyst at brokerage Excellence Nessuah, noting a “friendly deal” is preferable to a hostile one.
Allergan is the third-largest generic drugmaker in the United States and is seen as a better fit than Mylan because it will improve Teva’s distribution channels, access to profitable injectable drugs, and provide a presence in India.
Pressure has been growing on Teva, already the world’s biggest generic drugmaker, to find new revenue sources to combat the start of competition this year for its multiple sclerosis drug Copaxone. Copaxone accounts for about half of Teva’s profit.
Allergan CEO Brent Saunders, who led Actavis’ purchase of Forest Laboratories and then Allergan, said the sale will result in net proceeds of $36bn that the company will use to accelerate growth of its branded business.
The acquisition is the latest in an unprecedented wave of healthcare deals since the start of 2014, stretching from large drugmakers buying up smaller rivals, to consolidation among makers of generic medicines, and tie-ups between insurers. Global healthcare M&A reached $398.5bn as of July 23, up 80 percent on a year ago. Economies of scale are particularly important in generics, given the relatively low margins involved and the highly competitive market.
Teva shares, which had been weighed down by the Mylan uncertainty, were up 8.5 percent in New York trading. Allergan shares were up 7.5 percent and Mylan shares slid 14 percent.
“There is only one entity that would stand to lose (from Teva-Allergan), which is Mylan,” said Cowen and Co analyst Ken Cacciatore, who believes Teva’s shares will reach $100. Mylan said it would continue its acquisition of Perrigo, whose shares were up 4.9 percent. Mylan Executive Chairman Robert Coury repeatedly rejected Teva’s offer, saying the combination of Teva and Mylan was “without sound industrial logic or cultural fit.”
Teva said that the company had identified asset sales needed for the deal to pass muster with antitrust regulators in the United States and the United Kingdom.
Reuters
