Valeant ($VRX) may not want Zoetis ($ZTS), but it just made a big acquisition that shows it clearly wants in on the burgeoning animal health industry. On Friday, Valeant said it agreed to buy Mercury (Cayman) Holdings, the holding company of Amoun Pharmaceutical, an Egyptian pharmaceutical firm that markets 21 veterinary products.
The announcement came barely a month after rumors that Valeant might buy Zoetis sent shares of that animal health giant up 11% to an all-time high of $55.48--and then right back down when no bid emerged.
Amoun is the largest pharma company in Egypt, with top-selling antibiotics and anti-hypertensives, and it operates one of the most advanced manufacturing facilities in the Middle East, according to a press release from Valeant. The new addition will expand Valeant's presence in the Middle East and Africa, the company says. The deal is expected to close in the third quarter.
Rumors of Valeant's interest in the animal health industry first emerged in January, when Wall Street analysts started buzzing that the company might rebound from its failed bid to buy Allergan ($AGN) by snapping up Zoetis. The match made sense because activist investor William Ackman of Pershing Square--who had spearheaded the Allergan takeover attempt--also bought up shares of Zoetis, started griping about its high cost structure, and was reportedly pushing the company to put itself up for sale.
Valeant CEO J. Michael Pearson at first pooh-poohed the rumors of a merger, telling the press it was "highly unlikely" his company would make a play for Zoetis. Even when the rumors re-emerged in June, it looked like too big a bite for Valeant to swallow, with Zoetis's market cap at the time hovering around $25 billion. Still, Pearson stopped short of expressing a complete disinterest in animal health, and in fact said he would consider additions in that arena.
Zoetis, meanwhile, is deeply entrenched in a cost-cutting program that involves cutting 5,000 SKUs and exiting 10 manufacturing plants, which the company estimates will boost its operating margin from 25% in 2014 to 34% by 2017. And now Zoetis itself is the target of M&A speculation--this time in the reverse. In late June, an analyst from Canaccord Genuity issued a report suggesting Zoetis might be the ideal suitor for veterinary diagnostics maker IDEXX ($IDXX).
- here's the press release
- get BioWorld's take
- read more at FiercePharma