Exclusive: Watson close to $7 billion Actavis drug deal: sources

Wed Mar 21, 2012 4:03pm EDT
 
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By Ben Hirschler and Frank Siebelt

LONDON/FRANKFURT (Reuters) - Watson Pharmaceuticals Inc WPI.N is close to buying Swiss-based Actavis for around $7 billion, marking the latest deal between generics companies racing to achieve economies of scale, three sources familiar with the matter said.

The deal would involve U.S.-based Watson, already among the world's five largest generic drugmakers, paying between 5.0 billion and 5.5 billion euros ($6.6-7.3 billion) for Actavis, a business not much smaller than its own, the sources said.

After rapid expansion in the early 2000s, Actavis underwent a leveraged buyout in 2007 by Icelandic tycoon Bjorgolfur Thor Bjorgolfsson, which ultimately left Deutsche Bank (DBKGn.DE: Quote) holding billions of euros of its debt.

It has since been seen as a target for either an eventual initial public offering or a trade sale. Its strong presence in central and eastern Europe fits with Watson's desire to expand in these particular emerging markets.

Spokesmen at Watson, Actavis and Deutsche Bank declined to comment on Wednesday.

Targeting Actavis is a bold move for Watson, whose previous acquisitions include the $1.75 billion purchase of Arrow Group in 2009, which established a foothold for the company in Europe, and the $1.9 billion purchase of Andrx Corp in 2006.

The purchase of Actavis would be far larger but could be made to work since there would be scope for significant synergies, including the possible closure of some manufacturing capacity in the United States.

The generics sector has seen a wave of M&A in recent years because Western governments are putting pressure on the industry to provide drugs at the lowest possible price, which favors large players who can produce at low costs.   Continued...

 
Actavis global headquarters are seen in an undated handout photo. Watson Pharmaceuticals Inc is close to buying Swiss-based Actavis for around $7 billion, marking the latest deal between generics companies racing to achieve economies of scale, three sources familiar with the matter said. REUTERS/Actavis/Handout