Watson Pharmaceuticals has decided to acquire privately held generics pharmaceutical company Actavis Group for an upfront payment of $5.6 billion. As a result, Watson will become the third largest global generics company with 2012 anticipated pro forma revenue of approximately $8 billion.
"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.
Actavis, which had 2011 revenues of approximately $2.5 billion, markets more than 1,000 products globally and has approximately 300 projects in its development pipeline. The acquisition will expand Watson's core leadership position in modified release, solid oral dosage and transdermal products into semi-solids, liquids and injectables. The result will be a broader and more diversified global product portfolio, and an expanded development pipeline. When combined, the company will have 45 First-to-Files and 30 exclusive First-to-Files in the U.S. Furthermore, once combined, Watson will have more than 17,000 employees, approximately 20 manufacturing facilities and more than a dozen R&D centers globally.
"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," said Bisaro.
The transaction achieves Watson's stated strategic objective of expanding and diversifying its business into a truly global company. Once the transaction is completed, approximately 40% of Watson’s generic revenues will come from markets outside of the U.S.
"This transaction is financially compelling, accelerating Watson's top and bottom-line growth profile for the foreseeable future,” said Bisaro. “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."
"I saw a great opportunity in the combination of these companies and have worked relentlessly for the past several months on making it happen,” said Thor Bjorgolfsson, chairman of investment firm Novator, the largest shareholder in Actavis for over a decade. “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.”
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 $331 million, based on a per share price of $60, using a Euro to U.S. dollar exchange rate of 1.32.