DEALTALK: Warner Chilcott buy may be Actavis' best takeover defense

Fri May 17, 2013 12:57pm EDT
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By Jessica Toonkel

NEW YORK May 17 (Reuters) - U.S. generic drugmaker Actavis , the subject of intense takeover speculation, may have found its best defense: a potential purchase of Warner Chilcott Plc, a specialty pharmaceutical company that has been for sale on and off for years.

Over the past several weeks, Actavis has spurned approaches from Canadian pharmaceutical company Valeant Pharmaceuticals International and U.S. competitor Mylan Inc, to instead pursue a bid for Warner Chilcott, people familiar with the situation have said.

Buying Warner Chilcott, a maker of women's health pharmaceuticals with a $4.8 billion market value, would put Actavis in the branded pharmaceutical space and reduce its tax rate because Warner Chilcott is based in Ireland.

For other healthcare companies, Warner Chilcott is far from a desired target. A big chunk of its revenue comes from drugs soon approaching patent expiration. Efforts to sell the company failed repeatedly over the years given little buyer interest.

A combination of Actavis and Warner Chilcott would likely kill chances of Actavis being taken over anytime soon by Valeant, Mylan or any other suitor eyeing the $15.8 billion company, according to analysts and people close to the situation who asked not to be named because the matter is not public.

Even Michael Pearson, the highly acquisitive chief executive of Valeant who routinely talks to other CEOs about acquisitions to test the waters, stayed away from Warner Chilcott so far.

Mylan, meanwhile, will not come back with another offer for Actavis if it goes through with its acquisition of Warner Chilcott, said one of the sources with knowledge of the matter.

If Actavis buys Warner Chilcott, it would be virtually impossible for Mylan, with a market value of $11.7 billion, to buy the combined firm. Mylan already has about $6 billion in debt and analysts estimate that a combined Actavis-Warner Chilcott would be closer to $21 billion.   Continued...