Teva in $40.5-bn pact to buy Allergan's generics, ends Mylan bid

Generic drug giant Teva Pharmaceutical Industries Ltd. today struck a deal to buy Ireland's Allergan Plc's generic pharmaceuticals business for $40.5 billion in cash and stock, the largest-ever acquisition by an Israeli company.

Jerusalem-based Teva also announced it has withdrawn its proposed April $40-billion cash and stock offer to buy Mylan NV following its decision to acquire the Allergan Generics unit (See: Teva plans to raise bid for rival drugmaker Mylan to $42 bn).

Under the deal, Teva will pay $33.75 billion in cash and stocks valued today at $6.75 billion, giving Allergan's shareholders under 10-per cent stake in Teva.

Teva expects to fund the deal through a combination of new equity, debt financing and cash on hand.

Post closing, Teva expects to have pro forma sales of approximately $26 billion and EBITDA of approximately $9.5 billion in 2016, including an estimated $11 billion in sales outside of the US.

Teva also said it believes the acquisition would be significantly accretive to non-GAAP EPS, including expected double digit non-GAAP EPS accretion in 2016 and more than 20 per cent accretion in year two and year three following the close of the transaction.

Teva expects to achieve cost synergies and tax savings of approximately $1.4 billion annually, from savings to come from efficiencies in operations, G&A, manufacturing, and sales and marketing.

The combined company will have a commercial presence across 100 markets, including a top three leadership position in over 40 markets.

''This strategic acquisition brings together two leading generics businesses with complementary strengths, brands and cultures, providing patients with more affordable access to quality medicines, and creating significant financial benefits for Teva stockholders,'' Teva said in a statement.

Allergan, based in Dublin and with operating headquarters in New Jersey, was created in late 2014 through the $66-billion acquisition of US Botox maker Allergan Inc by Actavis Plc, and last month rebranded the combined company as Allergan. It now has a market cap of $121 billion.

Prior to the deal, Actavis was the world's third-largest generic drug maker behind Teva and India's Sun Pharmaceuticals. It is also the third-largest generics manufacturer in the US where it continues to operate as Actavis.

Post-merger, Allergan will have one of the broadest product portfolios and strongest pipelines in the generics industry. It has more than 750 molecules in 1,700 dosage combinations marketed globally through operations in more than 60 countries and around 40 per cent of its $7 billion generic drug revenue comes from outside the US.

The Dublin-based company is in leading market positions in key established commercial markets and emerging markets in Central and Eastern Europe, Russia, the UK, France and Australia.

It has 30 manufacturing and distribution facilities around the world, including in China, India, Indonesia and Singapore.

Established in Jerusalem in 1901 by Chaim Salomon, Moshe Levin and Yitschak Elstein, Teva started out as a small wholesaler of imported drugs. The company has since come a long way to become the biggest corporation in Israel and currently has a market cap of $60 billion.

Since it is based in Israel, Teva stands to gain huge tax benefits if the Allergen generic unit deal succeeds, but the merger could draw intense scrutiny from anti-trust regulators from several countries.

Though a generic giant in the industry, Teva has recently lost market share to rivals like India's Sun Pharmaceutical Industries.

Teva CEO, Erez Vigodman has been looking for an acquisitions after the patent expiry last month of its best-selling branded drug for multiple sclerosis, Copaxone, which accounted for $3.1 billion or nearly 20 per cent of its $15.1 billion in revenue last year.

Last month the US Food and Drugs Administration approved the first generic version of Copaxone, which could wipe out a third of the drug's sales by 2018, although Teva has switched its patient onto a version with longer-lasting effects.