Actavis nabs Warner Chilcott in a $8.5B stock swap

Actavis ($ACT) and Warner Chilcott ($WCRX) have struck a deal. And it’s bigger than the $5 billion-or-so that was bandied about while the companies negotiated. About $3 billion bigger, in fact: According to Actavis, the company will acquire Warner in a stock swap worth $8.5 billion.

The acquisition will create an $11 billion company, Actavis said in its deal announcement. Merging its product portfolios gives Actavis four “core” therapeutic areas–women’s health, gastroenterology, urology and dermatology–worth about $3 billion.

Actavis is best known for its big generics business, but CEO Paul Bisaro’s recent goal has been building up the branded side of things. Warner brings about 20 products to the party, including its top seller, Asacol, an ulcerative colitis treatment that generated almost $800 million last year. Its now-off-patent osteoporosis blockbuster, Actonel, remains its second-biggest product at $519 million.

Citing the two companies’ “complementary strengths,” Bisaro said the deal “creates a strong specialty brand portfolio focused in therapeutic categories with strong growth potential, and is supported by a deep pipeline of development programs.”

Bisaro pointed especially to the combined women’s health business, which he expects to launch several products over the next several years. He also cited a couple of other benefits: a “favorable tax structure,” allowed for by Warner Chilcott’s domicile in Ireland; and international expansion.

The merger puts the kibosh on talk of a bigger company snapping up Actavis for itself. News surfaced over the past couple of weeks that Actavis had rejected a $15 billion offer from Mylan ($MYL), as well as a $13 billion bid from Valeant ($VRX). Novartis was also rumored to be in the mix, though the Swiss drugmaker denied any interest in an Actavis buyout.

Actavis and Warner announced their “early stage” talks a week ago. At the time, Leerink Swann analyst Jason Gerberry figured the new Actavis could save about $100 million a year by cutting overlapping operations, and the tax benefits could also help pump up earnings.


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