Watson acquires Actavis

Nov 1 2012

Watson Pharmaceuticals, Inc. (NYSE: WPI) today announced that it has completed the acquisition of the Actavis Group for EUR 4.25 billion.  The combination creates the world's third largest generic pharmaceutical company, with anticipated pro forma combined 2012 revenues in excess of $8 billion. 

Watson funded the transaction through a combination of $1.8 billion in term loan borrowings and the issuance of $3.9 billion in senior unsecured notes.  The Company said the transaction is immediately accretive to non-GAAP earnings, before synergies.  The Company also noted that the strong cash flows of the combined business are expected to permit rapid pay down of debt.

"Today we unite two powerful, profitable and rapidly growing companies into one exceptional global business.  As a result of accelerated integration planning, we will immediately begin to maximize the exceptional financial and commercial value of this combination," said Paul Bisaro, President and CEO of Watson.  "Over the past several months we have defined and communicated internally the Global Generics, R&D and Operations and Shared Services management structures and today begin operations as a combined company.  We also begin the immediate execution of our Day 1 through Day 100 integration strategies to support continued growth, while optimizing our global structure and capturing our projected synergies.  I am confident that working together, the 17,000 people of our new company will now be focused on the seamless integration of the company for strong and sustainable growth."

"With the acquisition complete, we now have the generic assets in place that will power our continued organic growth, and generate strong cash flow to support the rapid pay-down of debt, which will allow us to continue to focus on future investments to enhance all of our businesses, particularly our Global Brands and Biosimilars businesses.  Watson plans to host Investor Day 2013 in January to provide a more comprehensive review of the combined business."

Significant Synergies Expected

Watson continues to expect $300 million in annual cost synergy savings from the Actavis acquisition within three years.  These synergies are comprised of SG&A, R&D, corporate, purchasing and raw material supply savings.  

Transaction Financing Favors Rapid Deleveraging

The acquisition was funded through a combination of $1.8 billion in term loan borrowings at an average rate of three-month libor plus 150 basis points and the issuance of $3.9 billion in senior unsecured notes. The overall combined cost of debt for the acquisition was approximately 2.9 percent.  The combined company is expected to generate strong free cash flow in 2013, which favors rapid deleveraging.

Review of the Benefits of the Acquisition

This acquisition combines two growing, successful and highly profitable companies, and substantially completes Watson's expansion as a leading global generics company.  The combined Company begins operations with a defined global management structure and aggressive integration execution strategies in place to focus on organic growth and rapid achievement of synergies.

Expanded Global Geographic Footprint

The combined company has operations in more than 60 countries, with top 10 positions in more than 33 markets including the U.S., U.K., Canada, Australia, Nordics and Russia. With this global footprint, the combined company has an extensive platform for strong, future organic growth.  The strongest growth regions for the new company will be the U.S., Central and Eastern Europe and Russia and in Southeast Asia and Australia.  The Company is also the fastest growing generic pharmaceutical company in Western Europe, where growth is outpacing the overall market.  The combined company will be geographically diverse, with approximately 40 percent of its revenues coming from outside of the U.S.

Expanded Portfolio and Development Pipeline

The combined Company has an industry leading global product portfolio of over 750 molecules offered in more than 1,700 different combinations and dosage forms.  The Company also has expanded its core leadership position in oral solid modified release and transdermal products, as well as semi-solids, liquids and injectables.  The U.S. pipeline includes approximately 180 unique ANDAs pending at the FDA, including 47 First-to-Files, of which we believe over 30 are exclusive.  Outside of the U.S., the current pipeline includes more than 2,000 marketing authorizations pending approval and, globally, greater than 600 new development projects are underway covering multiple dosage forms.

Expanded Global Supply Chain

The Company has an expansive, diversified global supply chain with various technological capabilities, including the ability to manufacture more than 40 billion dosages worldwide.  The combined company has the expertise to develop solid dosage, modified release, patch, gel, liquid, semi-solid and injectable products for all of its global markets.

Source: Watson Pharmaceuticals, Inc.