It's official: Teva and Barr are getting hitched. It's a $7.46 billion cash-and-stock deal that will combine the world's largest and fourth-largest generics makers into one big copycat drug powerhouse. Teva will get added strength in Central Europe and in fast-growing Eastern-European markets. And, as the Wall Street Journal notes, it will expand not only Teva's portfolio of generics, but its branded drug business. Barr has first-to-market rights for several new generics over the next few years, and it has a strong set of branded women's health meds. Plus, it will vault Teva forward in its strategic plan to reach $20 billion in sales with a 20 percent margin by 2012.
Under the terms of the deal, Barr's common stock will be converted to cash and Teva ADRs at a per-share rate of $39.90 and .6272 of an ADR, valuing Barr at $66.50. That's a 42 percent premium over Wednesday's price and a 16 percent premium to Thursday's--which includes a big jump in value on rumors of the takeover. Teva also will assume $1.5 billion of Barr's debt.
Just how big of a generics maker might the combined companies represent? Pro forma, 2007 revenues would have been about $11.9 billion. And together, the two companies would operate in more than 60 countries. In a note to investors before the official announcement, Goldman Sachs said a deal in the $8 billion range would quickly add to Teva's earnings on a cash basis. But, the analysts said, combining with Barr would give Teva more exposure to the U.S. market, where growth is expected to slow.