Actavis to buy Forest for $25 billion; windfall for investor Icahn

Tue Feb 18, 2014 3:21pm EST
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By Caroline Humer and Esha Dey

(Reuters) - Generic drugmaker Actavis Plc ACT.N said on Tuesday it would buy Forest Laboratories Inc FRX.N for about $25 billion in cash and stock, giving it a major focus on higher-margin, branded treatments for Alzheimer's, hypertension and other disorders.

The deal also means a major payday for activist investor Carl Icahn, the second-largest shareholder at Forest Labs, who waged two proxy battles and threatened a third to change its leadership and strategy.

Actavis said it would pay the equivalent of $89.48 per share, representing a premium of 25 percent to Forest's closing price on Friday. The offer comprises $26.04 in cash and 0.3306 Actavis share for every Forest share.

Actavis started on its path to the $25 billion deal less than two years ago. Formerly known as U.S.-based Watson Pharmaceuticals, it announced a plan to buy Swiss-based Actavis for about $5.6 billion. It changed its name to Actavis and last year bought Ireland's Warner Chilcott for $8.5 billion, allowing it to relocate to Dublin, where it benefits from a significantly lower tax rate.

The new deal grew out of a dinner meeting between Actavis Chief Executive Officer Paul Bisaro and Forest CEO Brent Saunders during the JPMorgan Healthcare Conference in San Francisco last month.

"We weren't really thinking about buying or merging or getting together. It was really 'let's get to know each other a bit,'" Bisaro said in a telephone interview. "As Brent and I came together and talked about this, we realized that combined we can actually grow faster."

The companies completed the deal over the past weekend, helped Saunders said, by snowstorms that nearly locked up their teams in a New Jersey hotel. The Forest buyout, expected to close by the middle of the year, ranks as one of the top five pharma deals of the past decade.

Actavis shares rose more than 7 percent on Tuesday as investors backed the latest step in the company's strategy of acquiring specialty drugmakers to boost profit margins and sales. Shares of Forest jumped nearly 30 percent.   Continued...

Billionaire activist-investor Carl Icahn gives an interview on FOX Business Network's Neil Cavuto show in New York February 11, 2014. REUTERS/Brendan McDermid