UPDATE 4-Actavis to buy Warner Chilcott in $5 billion stock deal

Mon May 20, 2013 2:15pm EDT
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* Deal to increase 2014 earnings per share by 30 percent

* Deal to boost branded drug business

* Incorporation in Ireland to cut taxes

* Shares of both Actavis and Warner Chilcott rise

By Caroline Humer and Ransdell Pierson

May 20 (Reuters) - Generic drugmaker Actavis Inc, itself a recent takeover target, said on Monday it would buy specialty pharmaceutical company Warner Chilcott Plc for $5 billion in stock to expand its branded drug portfolio, lower taxes and increase profits.

The Warner Chilcott acquisition brings two new businesses - gastroenterology and dermatology - and adds additional women's health drugs like branded contraceptives to Actavis, which makes and sells drugs that are no longer under patent protection.

This is the second major purchase in the past two years for Actavis, which competes against larger companies like Teva Pharmaceuticals Industries Ltd and Mylan Inc.

Actavis is following Teva's path to growth. In recent years, Teva, the largest generic drugmaker in the world, has turned to acquiring specialty branded drugs, which have far higher profit margins than generics, to boost earnings.   Continued...