May 22, 2013 | By Márcio Barra
This Monday, It was confirmed that Actavis, the largest U.S. maker of generic drugs by market value, will acquire Ireland based, specialty pharmaceutical company Warner Chilcott in a stock-for-stock $8.5 billion deal, bigger than the previously reported $5 billion. This news comes after reports from last week that the two companies were in preliminary discussion.
This deal brings two new businesses to Actavis – gastroenterology and dermatology – and additional women health products, creating an $11 billion company.
Actavis has a well-established generic drug portfolio, including treatments for deep vein thrombosis, asthma medication and attention deficit. This move will allow the company to diversify its portfolio from the generic drug segment. Moreover, Actavis focus on the branded drug market segment was until now focused on the women’s health segment, where Warner Chilcott already has a strong presence.
As part of the move, Actavis will relocate its headquarters to Ireland Warner Chilcott’s residence, which would allow a lower corporate tax rate for the combined company.
The main reason for the deal, as stated by Actavis Chief Executive Officer Paul Bisaro to Bloomberg, was Warner Chilcott’s portfolio of drugs, but the tax benefits of basing the company outside the U.S. were the “icing on the cake,” The company will pay lower U.S. taxes, and lower total taxes, from 17% from about 37% over the course of a year.
Actavis is following a similar path to the one taken by Teva, the Israeli based company and the world’s biggest generic maker. Like Teva, Actavis’ strategy consists of acquiring specialty branded drugs, which have higher profit margins compared to generic drugs. Last year the company acquired Ascent Pharmahealth Ltd. Recently Actavis itself refused an offer from Mylan, another generic drug giant, for $15 billion.
The takeover is expected to be completed by the end of 2013. For more information on what follows after the deal, go here.