Actavis to buy Forest Labs in $25 billion deal
Generic drugmaker Actavis Plc said it would acquire specialty pharmaceuticals company Forest Laboratories Inc in a cash and stock deal it valued at about $25 billion.
Actavis shares rose 15 percent $221 in premarket trading on Tuesday as investors backed the latest step in the company's strategy of acquiring specialty drugmakers to boost profit margins and sales.
Actavis will pay the equivalent of $89.48 per share, representing a premium of 25 percent to Forest's Friday close. The offer comprises $26.04 in cash and 0.3306 Actavis shares for every Forest share.
Shares of Forest, which has been under pressure from activist investor Carl Icahn, rose 35 percent to $96.50.
"This is a huge win for all shareholders of Forest Labs and yet another validation of the activist investment philosophy in general," Icahn, who holds an 11.32 percent stake in Forest, said in a statement.
Icahn, who is the second-biggest investor in Forest, helped bring about a management change at the company in the middle of last year, when long-time CEO Howard Solomon retired and was replaced by former Bausch & Lomb CEO Brenton Saunders.
Forest faces a patent cliff on several of its biggest drugs,
including Alzheimer's treatment Namenda.
However, BMO Capital Markets analyst David Maris said he was not convinced that the deal made sense for Actavis because it may have trouble managing Forest's sprawling sales force.
Actavis said the deal would add to its adjusted earnings in 2015 and 2016, with annual free cash flow generation of greater than $4 billion in 2015.
Forest, whose biggest competitors include Teva Pharmaceuticals Industries Ltd and Mylan Inc , agreed in January to acquire privately held drugmaker Aptalis for $2.9 billion in an effort to increase earnings.
Greenhill & Co was financial adviser to Actavis, and Latham & Watkins the legal adviser. Forest was advised by J.P. Morgan and Wachtell, Lipton, Rosen & Katz.
(Reporting by Esha Dey in Bangalore, additional reporting by Natalie Grover; Editing by Saumyadeb Chakrabarty)