Actavis plc and Forest Laboratories Inc. announced that they have entered into a definitive agreement under which Actavis will acquire Forest for a combination of cash and equity valued at approximately $25 billion or $89.48 per Forest share ($26.04 in cash and 0.3306 Actavis shares for each share of Forest common stock). The per share consideration represents a premium of approximately 25 percent per share over Forest's stock price, and a premium of approximately 31 percent over Forest's 10-day volume weighted average stock price, as of the close of trading on February 14, 2014. If successfully completed, the transaction will combine two of the world's fastest-growing specialty pharmaceutical companies, with combined annual revenues of over $15 billion anticipated for 2015.
"With this strategic combination, we create an innovative new model in specialty pharmaceuticals leadership, with size and scale, a balanced offering of strong brands and generics, a focus on strategic, lower-risk drug development, and - most importantly - the ability to drive sustainable organic growth," said Paul Bisaro, Chairman and CEO of Actavis. "Bolstered by one of the deepest and most diversified product portfolios in the industry with an exceptionally strong pipeline, this transaction creates a powerful engine for generating long-term, double-digit revenue and earnings growth.
"The combination of Actavis and Forest is expected to yield double-digit accretion to non-GAAP earnings in 2015 and 2016, with significant annual free cash flow generation of greater than $4 billion in 2015, enabling us to rapidly de-lever. The combination has the potential to realize approximately $1 billion in operating and tax synergies, before any manufacturing synergies or revenue synergies, while we anticipate continuing to invest over $1 billion per year in R&D."
On a pro forma combined basis for full year 2014, the combined company will have an approximately $2 billion CNS franchise; Gastroenterology (GI) and Women's Health franchises valued at approximately $1 billion each; a Cardiovascular franchise that generates approximately $500 million; and Urology and Dermatology/Established Brand franchises approaching $500 million a year in sales each.
"The combination of Forest with Actavis creates a specialty company with annual sales of approximately $15 billion, a diversified portfolio and a geographically balanced business," said Brent Saunders, CEO and President of Forest. "This compelling combination gives us more optionality to drive future growth and sustainable shareholder value due to our expanded geographic and therapeutic presence, ability to drive new product flow through R&D, strong balance sheet and consistent cash flow. The terms of the agreement provide Forest shareholders with cash and the opportunity to participate in the future growth of our new, stronger combined company.
"Forest is a great fit with Actavis due to our strong legacy in branded specialty and primary care pharmaceuticals with a best in class commercial team, a top-notch drug development organization and a long history of successful partnerships. The acquisition builds on our blockbuster line call strategy in CNS and GI and dramatically extends our reach beyond the U.S. market," added Saunders. "By joining forces with Actavis, we become more relevant to key physicians and customers through blockbuster franchises in CNS, Women's Health, GI and Urology, as well as Actavis' global generics business."
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