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Teva signs $7.46b takeover of Barr By Haaretz Correspondent and Agencies , By Yoram Gabison Teva Pharmaceuticals, the world's biggest generic drug maker, is acquiring Barr Pharmaceuticals, the fourth largest generic firm in the U.S., for $7.46 billion. The deal announced on Friday has been approved by both boards and is expected to close late this year. Teva will pay 60% in cash and the rest in shares, making the deal the same size as Teva's takeover of Ivax in January 2006. Advertisement The acquisition particularly strengthens Teva in the U.S., but also in Central and Eastern Europe. Teva now controls 18% of the U.S. generic market, and has set a target of 30%. The acquisition will give it a 24% share of the U.S. market and 16% of generic drug sales arounfd the globe. Teva will pay $39.9 in cash and 0.6272 Teva shares for each Barr share. That adds up to $66.50 per Barr share at current prices. Barr shareholders will actually be getting Teva American Depositary Receipts. Barr closed last Thursday, the day before the deal was announced, at a market value of $6.2 billion on the New York Stock Exchange, so Teva's offer represents a 16.3% premium. Barr shares rose 22.1% on Thursday after TheMarker revealed the deal, closing at $57.17. But the offer price is actually a 42% premium over Barr's closing price on Wednesday. On Friday Teva's ADRs rose 4.4%, and Barr was up another 11%. Teva is also offering to assume $1.5 billion of the Montvale, N.J.-based company's debt. "The acquisition of Barr will elevate Teva's market leadership to a new level," said Teva CEO Shlomo Yanai. "The combination of our two companies provides an outstanding opportunity strategically and economically: It will enhance our market share and leadership position in the U.S. and key global markets, further strengthen our portfolio and pipeline, and provide upside to our strategic plan, by allowing us to exceed our 20/20 goals for 2012. "We have long admired Barr as a highly-focused company with an excellent management team. This is a transaction in which two great, strong companies are joining forces to capture an even greater share of the growing opportunities in generics and deliver even more value to our stakeholders." According to Bruce Downey, chairman and CEO of Barr: "This transaction will enable Teva to capitalize on Barr's portfolio of unique generic and proprietary products, benefit from our capabilities in biologics, and expand its presence in important Central and Eastern European markets. This agreement has the full support of Barr's board of directors and senior management, and will benefit the shareholders, customers and employees of Barr." Teva has $3.2 billion in liquid assets, and will therefore need to borrow at least $1.2 billion for the takeover. The company will probably need to take a bank loan until it can issue corporate bonds to cover the purchase price. This is how Teva financed its two pervious large deals, Ivax in January 2006 for $7.4 billion and Sicor in October 2003 for $3.4 billion. The new Teva will have annual sales of $11.9 billion, and the Israeli company expects the deal to add to its profits a year after it closes. Yanai announced six months ago that Teva's revenue target for 2012 is $20 billion, compared with 2007's $9.5 billion. Yanai's profit target for 2012 is 20% of sales, or $4 billion. The combined company would be a generic powerhouse employing about 37,000 people globally and operating directly in more than 60 countries. Teva forecasts savings of $300 million within three years from the synergies between the companies, which will allow it to cut costs. The deal will leave Teva with 200 applications for new drug approval and 500 products. Barr, which has $2.5 billion in annual revenues, describes itself as the largest maker of oral contraceptives in the U.S. It began selling a generic version of Bayer's birth-control pill Yasmin in the U.S. in July. Barr also has the rights to sell a generic version of the attention deficit hyperactivity disorder drug Adderall XR starting on April 1, 2009. The deal will give Teva a larger presence in Central and Eastern Europe, where Barr already has a footprint because of its 2006 purchase of Pliva, a Croatian drug maker. A Teva-Barr tie-up appears to pose no major U.S. antitrust issues that would scuttle the deal, analysts have said. Teva would also gain a prominent women's health franchise, including Barr's major portfolio in generic oral contraceptives. Barr also sells the brand-name contraceptive Seasonique, and the Plan B emergency contraceptive. Teva would also gain more opportunities for first-to-market generics that can have lucrative exclusivity periods. These Barr opportunities may allow Teva to bridge an expected earnings gap in the next few years, analysts have said. Recent events may have forced Teva's hand. Teva released study results earlier this month showing a new dosage of its big-selling multiple sclerosis drug Copaxone was not more effective than the current version, endangering Teva's ability to extend the key franchise. Teva also swooped in after Barr reported disappointing quarterly results in May that sent Barr shares to their lowest point in more than three years. The stock had recovered somewhat, but still was far off the $58 of November. Yanai told TheMarker that Teva did not pay a high price for Barr, despite some criticism from analysts on the cost. He did not want to reveal all of Teva's internal calculations, but claimed that the price was right. He explained that the two companies have minimal overlap and the combined product line will grow significantly. Barr also has an excellent development team. He said the synergies between Teva and Ivax were also greater than the company had forecast, and in Barr's case would come in research and development, production as well as reduced management and general costs. There were also tax benefits because Barr paid high tax rates: 42% in the first quarter this year compared with Teva's 20%. Lehman Brothers acted as financial adviser to Teva in the latest transaction, while Banc of America Securities advised Barr. Bookmark to del.icio.us   'Icon of evil' Hitler icons take center stage at Jerusalem students' end-of-year art show. Caught on film Human rights group releases video of IDF soldier shooting Palestinian at short range.

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