UPDATED: Actavis inks $25B deal for Forest in bid to build its brand stable

Actavis is extending its deal spree with another big buyout. The generics maker ($ACT) has agreed to buy Forest Laboratories ($FRX) for about $25 billion, in a bid to further build up its presence in branded drugs.

Actavis will pay $89.43 per share in cash and stock to add Forest's small stable of branded drugs, including the antidepressant Viibryd and the blood-pressure treatment Bystolic, to Actavis' generics-heavy line-up. And Forest, struggling to reinvent itself in the wake of its Lexapro patent cliff, will have a new home.

Actavis CEO Paul Bisaro--Courtesy of Actavis

A few years ago, Actavis CEO Paul Bisaro recognized that consolidation in the generics business, plus a slowing advance of newly off-patent blockbusters, would require a rethink at the company. Besides massing up in generics, Bisaro set a goal of adding more higher-margin branded medications to the company's less profitable mainstay.

So, Bisaro went on an M&A march. He engineered the merger of his company, then called Watson Laboratories, with generics rival Actavis in 2012, and took on the Actavis name.

Most recently, Actavis bought Warner Chilcott, the Dublin-based drugmaker, partly for its tax-friendly Irish domicile, and partly for its branded medications, including a portfolio of women's health products that fit right in with Actavis's business in that area.

Warner also brought along the colitis treatments Asacol and Delzicol, the newer of the two. Forest's new constipation remedy, Linzess, could complement that new gastrointestinal portfolio. Forest also has a number of late-stage drug candidates, giving Actavis the prospect of more branded products in the near term.

Forest CEO Brent Saunders will remain at the combined company, though his exact role has yet to be determined. He'll definitely join the board of directors, the companies said in a statement. Saunders joined Forest just months ago, after Valeant Pharmaceuticals ($VRX) bought out his previous company, Bausch + Lomb.

Not so long ago, Actavis was itself a takeover target. Last year, the company was in talks to sell to one of its peers, Mylan ($MYL), but those talks fell through.

Actavis would no doubt look for opportunities to squeeze costs out of the combined company, just as it did after the Watson-Actavis merger, when it launched a $300 million restructuring. Forest is already in the midst of a cost-cutting program, which targets $500 million in spending, including job cuts worth about $125 million. A big chunk of the cost squeeze will fall on R&D as well.

- see the release from Actavis
- read the WSJ piece (sub. req.)

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