Israel's Teva to acquire Allergan Generics for $40.5 bn

Israeli generics major Teva Pharmaceutical Industries Ltd has signed a definitive agreement with Allergan Plc to acquire Allergan Generics in a transaction valued at $40.5 billion. Upon closing, Allergan will receive $33.75 billion in cash and shares of Teva valued on July 27, 2015 at $6.75 billion, representing an estimated under 10 percent ownership stake in Teva. The transaction was unanimously approved by the Boards of Directors of Teva and Allergan and is expected to close in the first quarter of 2016.
 
The transaction will create a global leader in the generics industry by bringing together two leading generics businesses with complementary strengths, brands and cultures. When combined with Teva’s strong generics portfolio, Allergan Generics’ world-class generics pipeline, which holds a leading position in first-to-file opportunities (FTF) in the US, will further enhance Teva’s goals of delivering the highest quality generic medicines at the most competitive prices and cultivating the best development pipeline in the industry.

The resulting world-class product portfolio will be complemented by a significantly expanded and more efficient global footprint, including leadership positions and strengthened operations, sales and R&D platforms in attractive markets around the world. In addition, Teva expects to enhance its financial profile significantly with highly diversified revenues and profits and to unlock substantial, achievable cost synergies by eliminating duplication and inefficiencies on a global scale and capturing economies of scale.
 
“This transaction delivers on Teva’s strategic objectives in both generics and specialty. Through our acquisition of Allergan Generics, we will establish a strong foundation for long-term, sustainable growth, anchored by leading generics capabilities and a world-class late-stage pipeline that will accelerate our ability to build an exceptional portfolio of products – both in generics and specialty as well as the intersection of the two,” said Erez Vigodman, president and CEO of Teva.
 
Following the completion of the acquisition, Teva is expected to have pro forma sales of approximately $26 billion and EBITDA of approximately $9.5 billion in 2016, including an estimated $11 billion in sales outside of the US.
 
Teva expects the acquisition to generate strong free cash flow of approximately $6.5 billion in 2016 and expects increasing free cash flow in subsequent years. Teva’s free cash flow will allow for rapid deleveraging and the ability to continue to pursue future acquisitions to expand Teva’s portfolio in both specialty pharmaceuticals and generics, in line with Teva’s stated strategy to grow through value-enhancing and complementary acquisitions. Teva will continue to evaluate opportunities to deliver attractive total stockholder returns on an ongoing basis.
 
Teva’s acquisition of Allergan Generics will improve international commercial opportunities by positioning Teva to significantly enhance the global scale of its sales and R&D platforms. Together, Teva and Allergan Generics will have a commercial presence across 100 markets, including a top three leadership position in over 40 markets.