Allergan Generics acquired by Teva in $40.5bn deal

September 2015 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

In a transaction which creates a major transformative generics and speciality company, Teva Pharmaceutical Industries Ltd has signed a definitive agreement with Allergan plc to acquire Allergan Generics for $40.5bn.

The agreement brings together two leading generics businesses with complementary strengths, brands and cultures, and will make Teva a top 10 global pharmaceutical company with an enhanced financial profile and strong, diversified revenues.

The new company hopes to transform the global generics space through its best-in-class generics pipeline, R&D capabilities, operational network, supply chain, global commercial deployment and infrastructure to achieve greater efficiencies across the healthcare system.

Upon closing, Allergan will receive $33.75bn in cash and shares of Teva valued at $6.75bn, representing an estimated under 10 percent ownership stake in Teva.

“This transaction delivers on Teva’s strategic objectives in both generics and specialty,” said Erez Vigodman, president and CEO of Teva. “Through our acquisition of Allergan Generics, we will establish a strong foundation for long-term, sustainable growth, anchored by leading generics capabilities and a world-class late-stage pipeline that will accelerate our ability to build an exceptional portfolio of products – both in generics and specialty as well as the intersection of the two.”

The acquisition is expected to provide substantial financial benefits for Teva including highly diversified revenues and profits, and substantial cost synergies and tax savings. Teva expects Allergan Generics to contribute approximately $2.7bn in EBITDA in 2016, excluding synergies.

The Teva/Allergan deal will also help eliminate inefficiencies and duplications in the global generics space and allow Teva to better focus resources and efforts in complex generics, biosimilars and specialty products in key therapeutic areas.

Mr Vigodman continued: “Our respective portfolios of generic medicines and applications are highly complementary, providing Teva with high quality growth and earnings visibility, and the scale and resources to expand upon our specialty capabilities.”

When combined with Teva’s generics portfolio, Allergan Generics’ generics pipeline, which holds a leading position in first-to-file opportunities in the US, is expected to further enhance Teva’s goals of delivering high quality generic medicines at competitive prices and cultivating its development pipeline.

“This transaction will accelerate Allergan’s evolution into a branded Growth Pharma leader, enable a sharpened focus on expanding and enhancing our global branded pharmaceutical business and strengthen our financial position to build on our proven track-record of value creation led by effective capital deployment,” said Brent Saunders, president and CEO of Dublin-based Allergan. “We will have the potential to add scale in existing therapeutic areas, expand into new therapeutic areas and geographies and evaluate strategic transformational deals as we continue to build on our position as the most dynamic branded growth pharma company.”

Financial advisers to Teva during the transaction are Barclays and Greenhill & Co, while Sullivan & Cromwell LLP and Tulchinsky Stern Marciano Cohen Levitski & Co are serving as legal counsel. For Allergen, J.P. Morgan is acting as sole financial adviser and Latham & Watkins LLP as lead legal adviser.

The Teva/Allergan transaction has been unanimously approved by the boards of directors of both companies and is expected to close in the first quarter of 2016.

“This transaction is another step forward on our roadmap to reinforce our already strong position,” said a delighted Mr Vigodman. “Teva and Allergan Generics share a commitment to innovation, quality, and improving the health of people around the world. Together, the employees of Teva and Allergan Generics will play a critical role ensuring we capture the full potential value resulting from this transaction. We look forward to delivering the benefits of this transaction to our stockholders, and better serving patients, customers and healthcare systems throughout the world.”

Fraser Tennant