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Teva Pharmaceutical Industries is on the short list of candidates to buy liquidity-strapped Icelandic drug company Actavis, reports Bloomberg.

Teva has already pulled off the two biggest corporate mergers in Israeli history, first buying Ivax Corp for $3.4 billion in 2006, then buying Barr Pharmaceuticals at the start of the year for $7.5 billion. Actavis could set the buyer back as much as $7.8 billion, says the news agency. The minimum bid is $4.5 billion, however. Other contenders include Sanofi-Aventis of France and Watson Pharmaceuticals of the U.S.

Actavis went private in 2007, following its acquisition and delisting by the private equity firm Novator, run by Islandic entrepreneur Bjorgolfur Thor Bjorgolfsson. But last year Merrill Lynch was hired to find a buyer for the Icelandic firm, after Bjorgolfsson lost much of his fortune when the Icelandic bank Landsbanki collapsed and was nationalized.

On January 8, Teva's top U.S. executive William S. Marth told Reuters that the Israeli generic drugs giant was unlikely to make a big acquisition in the near future, but might consider a piece of a company. It's busy digesting Barr, he explained. Also, assets on the block these days are distressed, and they're distressed for a reason, Marth said.

On January 30, Novartis announced that it wouldn't participate in the race for Actavis, or Germany's Ratiopharm, for that matter. Actavis did not represent a good fit with Novartis a Ratiopharm acquisition was not feasible because of anti-trust issues, Novartis CEO Daniel Vasella told Reuters.

Actavis is one of the world's biggest generic drug producers, but it has 5 billion euros in debt, most of it owed to Deutsche Bank, which will be a weight on whichever firm buys the Icelandic company. It has operations not only in the frozen north but in Turkey, Bulgaria, Malta and Serbia, which could nicely add to Teva's geographical range.

Iceland, which is on the brink of bankruptcy after massive failure of its banking system, may apply for fast-track membership in the European Union. The European Commission last week suggested that Reykjavik apply and join with Croatia in 2011. Iceland had been cautious about entering the EU, but support for the idea has risen after its economy collapsed last year under the weight of billions of dollars of foreign debts, racked up by its ambitious but now busted banks.