Teva could kill 3 birds with one $6B deal for India's Cipla

Teva CEO Erez Vigodman

Last week, Teva ($TEVA) CEO Erez Vigodman said the Israeli company was looking to refocus on its generics business, bolster its presence in emerging markets and become a major player in the global biosimilars race. And now, he may be eyeing a $6 billion deal that could help accomplish all three goals.

As LiveMint reports, Teva is courting India's Cipla, readying its third attempt for the generics maker after two failed approaches. As one source told the paper, Teva made its latest offer in November, noting that the proposal was "very attractive."

Cipla, on the other hand, denied ever receiving such a bid, telling Bloomberg the newspaper's report was "purely baseless and speculative in nature."

"We have consistently denied such rumors in the past and continue to do so," the company told the news service in a statement.

Whether or not Teva has already reached out to Cipla, it might not be such a bad idea based on the company's stated aims. As LiveMint notes, Teva--currently in the midst of a $2 billion cost-cutting drive--could leverage Cipla's large Indian manufacturing base, shifting production activity to cheaper locations to save money. It's a strategy competitor Mylan ($MYL) has been playing since 2006, and that company currently has more than half of its 20,000 employees operating in India.

Cipla is also in the biosimilars mix, boasting a partnership it set up in 2010 with an eye on a knockoff of Roche's ($RHHBY) breast cancer blockbuster Herceptin. And just over a year ago, it turned out a copy of Amgen's ($AMGN) rheumatoid arthritis giant Enbrel, announcing plans to sell it on the subcontinent at a 30% discount.

Given the strategic fit, Teva could be willing to pay a pretty penny for Cipla--resources the Petah Tikvah-based drugmaker has, CFO Eyal Desheh said last week.

"Teva always prefers to buy a controlling stake in a targeted company, and will potentially buy the entire 36.8% promoter stake in Cipla, in addition to making the mandatory open offer to pick up another 20% stake from the public, at a premium of at least 20% on the existing market value," the source told LiveMint.

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