P&G's global pharmaceuticals business sold to Warner Chilcott for $3.1 billion

Aug 24 2009

The Procter & Gamble Company (NYSE: PG) and Warner Chilcott plc (Nasdaq: WCRX) today announced an agreement for the sale of P&G's global pharmaceuticals business to Warner Chilcott for an up-front cash payment of $3.1 billion.

Under the terms of the agreement, Warner Chilcott, a leading specialty pharmaceuticals company, will acquire P&G's portfolio of branded pharmaceutical products, including Asacol(R) HD (mesalamine) Delayed-Release Tablets for ulcerative colitis, Actonel(R) (risedronate sodium) for osteoporosis, and the co-promotion rights to Enablex(R) (darifenacin) for the treatment of overactive bladder, as well as P&G's prescription drug product pipeline and manufacturing facilities in Puerto Rico and Germany. In addition, the majority of the 2,300 employees working on P&G's pharmaceuticals business are expected to transfer to Warner Chilcott. Both companies expect the transaction to close by the end of the 2009 calendar year, pending necessary regulatory approvals.

"The acquisition of the P&G pharmaceutical brands and employee talent is a transformational, strategic move for us," said Roger Boissonneault, president and chief executive officer of Warner Chilcott. "The acquisition transforms Warner Chilcott into a global pharmaceutical company, expands our presence in women's healthcare, establishes us in the urology market in advance of the anticipated launch of our erectile dysfunction treatments, and adds gastroenterology therapies to our product portfolio."

"This move enables us to focus singularly on winning in consumer health care - Personal Health Care, Oral Care and Feminine Care," said Bob McDonald, president and chief executive officer of Procter & Gamble.

McDonald extended special thanks to P&G's pharmaceuticals employees. "These men and women have built a large and profitable global business which has improved millions of lives," he said. "Their welfare was a key consideration in the choice of a buyer. We are deeply grateful to them and are glad they'll be able to continue this work as part of another great company."

P&G said it believes Warner Chilcott will be a stronger and better investor in P&G's pharmaceutical assets, brands and capabilities because of Warner Chilcott's focus to grow its pharmaceuticals business, versus P&G's decision to prioritize investments on its consumer health care businesses.

The sale of P&G's pharmaceuticals business to Warner Chilcott for a price of $3.1 billion will result in a one-time earnings increase for P&G of approximately $1.4 billion after-tax, or approximately $0.44 per share. P&G also said it expects EPS dilution in the range of $0.10 to $0.12 per share in fiscal year 2010 due to the lost earnings from the business and stranded overhead costs. These figures assume the transaction will close on November 1, 2009. P&G said that annualized EPS dilution would likely be in the range of $0.16 to $0.18 per share. The specific timing for the completion of the transaction will be subject to certain regulatory approvals and other conditions set forth in the purchase agreement. If the actual closing timing differs from the date noted above, there will be adjustments to the sale price, per the agreement between the companies. Updated financial impacts will be provided when the transaction is completed.

For Warner Chilcott, the acquisition expands its presence in existing specialty pharmaceutical markets and provides access to new physician offices in 14 countries. In addition, Warner Chilcott will acquire P&G's pharmaceutical development capabilities and clinical pipeline, which is expected to broaden Warner Chilcott's product portfolio in future years. On a preliminary, unaudited basis, P&G's pharmaceuticals business had revenues of approximately $2.3 billion, and net income of approximately $540 million for the year ended June 30, 2009. Warner Chilcott intends to finance the acquisition with debt proceeds and has received commitments from a group of lenders to provide senior secured debt facilities and a senior unsecured bridge facility.

Warner Chilcott's legal advisor is Davis Polk & Wardwell, LLP and lead financial advisors are J.P. Morgan Securities Inc. and Morgan Stanley & Co. Incorporated. Also advising Warner Chilcott are BofA Merrill Lynch, Credit Suisse Securities (USA) LLC, Barclays Capital Inc. and Citigroup Global Markets Inc. Procter & Gamble's financial advisor is Goldman Sachs and its legal advisor is Covington & Burling, LLP.

Conference Calls

Warner Chilcott will host a conference call open to all interested parties, on Monday, August 24, 2009 beginning at 9:00 a.m. ET. The number to call within the United States and Canada is (877) 852-6581. Participants outside the United States and Canada should call (719) 325-4804. Investors and other interested parties may also access the conference call via a simultaneous audio webcast. A replay of the conference call will be available for two weeks following the call and can be accessed by dialing (888) 203-1112 from within the United States and Canada or (719) 457-0820 from outside the United States and Canada. The replay ID number is 7292431.

P&G will host a conference call regarding this transaction on Monday, August 24, 2009 beginning at 9:00 a.m. ET. President and Chief Executive Officer Bob McDonald and Chief Financial Officer Jon R. Moeller will discuss the announcement. Media and investors can access the live webcast. An audio replay will be available for one week following the call and can be accessed by dialing (888) 286-8010 or (617) 801-6888, confirmation code 8633120.