Actavis has entered into a definitive agreement to acquire fully integrated, specialty pharmaceutical company Forest Laboratories for $25bn, or $89.48 per Forest share in a cash and stock combination.
The acquisition of Forest is expected to be completed in 2015. It will increase specialty drugs to represent about 50% of combined company revenue of more than $15bn.
The deal is expected to yield double-digit accretion to non-GAAP earnings in 2015 and 2016, with significant annual free cash-flow generation of more than $4bn in 2015.
Actavis and Forest combining has the potential to realise $1bn in operating and tax synergies, before any from manufacturing or revenue.
Actavis chairman and CEO Paul Bisaro said: "Bolstered by one of the deepest and most diversified product portfolios in the industry with an exceptionally strong pipeline, this transaction creates a powerful engine for generating long-term, double-digit revenue and earnings growth."
The combined firm will have a $2bn CNS franchise; Gastroenterology (GI) and Women’s Health franchises valued at about $1bn each; a Cardiovascular franchise that generates around $500m; and Urology and Dermatology/Established Brand franchises approaching $500m a year in sales each, on a pro forma combined basis for full year 2014.
Forest president and CEO Brent Saunders said: "The terms of the agreement provide Forest shareholders with cash and the opportunity to participate in the future growth of our new, stronger combined company.
"The acquisition builds on our blockbuster line call strategy in CNS and GI and dramatically extends our reach beyond the US.
"By joining forces with Actavis, we become more relevant to key physicians and customers through blockbuster franchises in CNS, Women’s Health, GI and Urology, as well as Actavis’ global generics business."
Actavis chairman and CEO Paul Bisaro will be responsible for leading the combined company.
The integration of the two companies will be led by the Actavis and Forest senior management teams, with integration planning expected to start immediately to assure a rapid transition to a single company following close.
According to Actavis, three members of the Forest board of directors will be named to the Actavis board of directors following the deal’s completion.
The acquisition will likely expand the specialty pharmaceuticals R&D pipeline of the combined company with investment in excess of $1bn in new product development on an annual basis.
In addition, the combination of Actavis and Forest will help add more than six near and mid-term R&D products to Actavis’ portfolio.
Because of its wide marketing reach, the combined company will help expand sales and marketing across multiple market segments.
Greenhill is serving as financial advisor to Actavis and Latham & Watkins is serving as Actavis’ legal advisor, while JP Morgan is serving as financial advisor to Forest and Wachtell, Lipton, Rosen & Katz is serving as Forest’s legal advisor.
Image: The headquarters of Actavis Group. Photo: courtesy of Jóhann Heiðar Árnason.