Watson Pharmaceuticals to Acquire Actavis for $5.6 Billion

Apr 30, 2012

In a move designed to increase its international presence, Watson Pharmaceuticals has agreed to acquire Actavis for EUR 4.25 billion ($5.6 billion). With the acquisition, Watson will become the third largest global generic-drug company with 2012 anticipated pro forma revenues of approximately $8 billion. Once the transaction is completed, approximately 40% of Watson’s generic-drug revenues will come from markets outside of the United States.

Actavis has a commercial presence in more than 40 countries, markets more than 1000 products globally, has approximately 300 projects in its development pipeline, and manufactured more than 22 billion pharmaceutical doses in 2011, according to an Apr. 25, 2012, Watson press release. The company has more than 10,000 employees worldwide and had 2011 revenues of approximately $2.5 billion.

The combined company will hold a top-three position in 11 markets and a top-five position in 15 markets, according to Watson. Actavis’s position in Central and Eastern Europe and Russia complements Watson's position in established markets, including the United Kingdom, France, and Australia. The acquisition will expand Watson's position in modified-release, solid oral dosage, and transdermal products into semisolids, liquids, and injectables. Combined, Watson will have more than 17,000 employees globally, and at acquisition close will have approximately 20 manufacturing facilities.

Under the terms of the agreement, Watson will acquire Actavis for an upfront payment of EUR 4.25 billion ($5.62 billion). Actavis stakeholders could also receive additional consideration, contingent upon Actavis achieving negotiated levels of certain 2012 performance targets. The contingent payment, if fully earned, would result in the delivery of up to 5.5 million shares of Watson common stock in 2013. This contingent payment was valued during the negotiations at EUR 250 million ($331 million), based on a per share price of $60, using a euro-to-US dollar exchange rate of 1.32. Watson expects to achieve annual synergies of $300 million within three years following transaction close, predominantly consisting of selling, general, and administrative expenses, R&D, and corporate cost synergies. The acquisition is subject to customary conditions, including review by the US Federal Trade Commission. Pending approvals, Watson anticipates closing the transaction in the fourth quarter of 2012.

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