Israel’s Teva buys Allergan generic drug company for $40.5B

Teva will pay $33.75 billion in cash and $6.75 billion in shares, representing a 10 percent stake in the Israel-based company, Teva said. Teva wants to bulk up its core generics business to help cope with stagnating drug prices and a decline in the supply of its raw material, drugs worth copying that are losing patent protection. Teva is the largest generic-drug company by sales in the world, and is also the third- largest competitor in the drug market.

“What we are doing here will enable Teva to be one of the winners of the ever-changing pharmaceutical industry”, Teva Chief Executive Erez Vigodman said in an interview.

At the same time Mylan’s shares plunged, Teva’s stock shot higher, adding $6.70, or 10.8 percent, to $68.55 in early trading.

(NYSE:TEVA) dropped its $40 billion hostile takeover bid.

In a separate press release announcing its abandonment of its Mylan bid, Teva’s Vigodman said, “We continue to believe that a combination of Teva and Mylan would have made sense for our companies, our respective stockholders and the healthcare industry as a whole”. So far, however, they have been rebuffed. Meanwhile, Allergan rose 5.5% premarket in New York, while Mylan (NASDAQ:MYL) shares slumped 11.9%.

The deal would be the biggest in Israel’s history, reports said.

Allergan has its global headquarters in Dublin, Ireland and the administrative headquarters are in New Jersey, US.

Teva has this morning (Monday) confirmed a $40.5-billion offer to acquire Allergan’s generics division, and that it is pulling back from its pursuit of Mylan.

It expects cost synergies and tax savings of US$1.4 billion annually by the third anniversary, from efficiencies in operations, manufacturing, and sales and marketing. Allergan’s branded drugs business makes products such as Botox and Alzheimer’s drug Namenda. Also, the lesser overlap should speed regulatory approval. The $560m all-cash transaction is expected to close by year-end. The source, who asked not to be identified because the information is private, said that the deal will most likely be in cash. “Oral contraceptives could be one of the few areas where the two drug makers may need to sell products and that is where Indian companies may evince interest”, the expert said.

Other industry analysts expect Mylan will have to raise its $34 billion offer for Perrigo, and if that doesn’t work, try to keep growth aloft with smaller deals.

Wall Street analysts were already speculating on what deal Allergan might turn to next. Pharmaceutical deals announced so far in this year have surpassed $180 billion, according to Bloomberg.

Write to Jonathan D.