The takeover boom in the pharmaceuticals industry just can’t stop.
Endo International Plc (ENDP) said Monday it’s buying generic drugmaker Par for a total of $8.05 billion worth of cash, debt and shares, in a deal that will propel it into the top five U.S. makers of generic drugs.
The deal is the latest in what is the hottest sector of the year for M&A. According to figures from Dealogic, healthcare deals worth $239.5 billion were struck in the first four months of 2015, second only to the oil and gas sector (whose figure is inflated by the mammoth $70 billion deal between Royal Dutch Shell Plc and BG Group Plc). It comes only two months after Endo failing with a $15.7 billion bid for Salix Pharmaceuticals Inc (SLXP), which opted to be Canada’s Valeant (VRX) (which in turn had money to burn after failing to buy botox-maker Allergan Inc (AGN) last year.
Earlier this month, the deal-hungry Endo had snapped up a portfolio of generics from a South Africa-based subsidiary of Aspen Holdings.
Par was taken private in 2012 by private equity group TPG. Endo said the company’s portfolio of nearly 100 drugs is “highly profitable”, and will make its own generics unit one of the fastest-growing in the industry. Par had 115 “Abbreviated New Drug Applications” outstanding at the Food and Drug Administration as of the end of last year. Endo reckoned that Par’s R&D pipeline could generate another 20-25 ANDA filings a year between now and 2017.
Around a third of them were likely to be the first generic product to market in their respective field, making them likely to be in demand from healthcare providers eager to make quick cost savings as the patents on the equivalent branded drugs expire.
Endo said it expected to issue about 18 million new shares (with a value of around $1.55 billion) as the equity part of the deal, increasing its share base by some 10%. The rest will come from cash on hand and financing arranged by Deutsche Bank AG and Barclays Plc.
TPG had been looking to exit its investment through the public markets, and had hired JP Morgan and Goldman Sachs to manage an initial public offering in March. JP Morgan was named as soled adviser to Par and TPG in the press release Monday.
Endo said it expects the deal to close in the second half of the year, and said it will aim to reduce its net debt to less than four times earnings before interest, taxes, depreciation and amortization within 12-18 months after that.
Endo’s bid for Salix had failed in part because Salix shareholders preferred Valeant’s all-cash offer to taking 75% of the consideration in the form of Endo’s stock.