Dublin-based firm Actavis, one of the world’s largest generic-drugs makers by market value, has agreed to buy Forest Laboratories for about $25bn (€18bn).
The acquisition will change Actavis’s mix of sales, provide the combined drugmaker with over $1bn in cost savings, and bring Forest’s branded products to more markets.
“Forest presented an extraordinarily unique opportunity to create a new kind of company,” said Paul Bisaro, Actavis’s CEO.
According to filings with the Companies Registration Office in Ireland, the firm only has class A share capital of €40,000, but its class C, D, E, and F shares are valued at over $25bn.
Actavis depends on mergers and acquisitions to sustain earnings growth, since developing drugs through research and development is so costly, said Ori Hershkovitz, a partner at Sphera Funds Management.
“They have promised the market that they would do a large amount of deals to keep the accretion alive,” said Mr Hershkovitz. “If you can’t do a large amount of research and development&, there’s only one way to grow and that’s through &mergers and acquisitions.”
The deal is a win for billionaire investor Carl Icahn, Forest’s second-largest holder who gained seats on the board in 2012 and 2013, and pushed for a sale.
After investing in Forest in 2009 and waging proxy battles starting in 2011, Icahn said he was pleased with Saunders’ leadership.
“To quote Shakespeare, ‘All’s well that ends well,’ and we applaud Brent Saunders, who, in less than six months at the helm, has helped to bring about, in my opinion, one of the best pharma mergers in the last decade,” Mr Icahn said.
Saunders, the former CEO of Bausch & Lomb, took over leadership of Forest in September with support from Icahn.
Forest said last month it reached an agreement to buy Aptalis Pharma for $2.9bn to add treatments for gastro-intestinal ailments and cystic fibrosis. He will join the Actavis board.
* Additional reporting Bloomberg