Analysts have put a pencil to the Par Pharmaceutical buyout, and they've concluded the company could bring a good bit more than $50 per share from a generics-industry bidder. Add cash flow of up to $250 million a year to potential cost-cutting synergies, and you get a price of $60 a share or more, pharma-watchers figure.
The copycat drugmaker ($PRX) said yesterday it had agreed to a buyout by TPG, the private equity firm, in a $50-per-share deal valued at $1.9 billion. Of course, as an investment firm, TPG doesn't have any overlapping functions, like distribution or manufacturing, to eye for cuts.
Nor is it a foreign drugmaker looking to expand in the U.S., where generics utilization is expected to continue growing as more blockbusters fall off the patent cliff. That's an ideal industry bidder for Par, UBS analyst Ami Fadia wrote. Par could "easily generate cash flows of about $200 million to $250 million a year," Fadia notes (as quoted by The New York Times), "which we value at closer to $60 a share in the hands of a strategic buyer who would be able to drive synergies."
Gabelli & Co.'s Kevin Kedra thinks Par could fetch even more. Up to $67 per share, to be exact. He, too, thinks an international company would be a likely bidder. "Maybe a European company that's looking to make a big move into the U.S.," he posits.
Par has a go-shop option through August 24, so rival genericsmakers do have time to make an offer. Meanwhile, as the NYT reports, two law firms have said they're investigating Par's arrangement with TPG. They're questioning whether the board shopped the deal enough; a precipitate deal with TPG could deprive shareholders of a better payoff.
- read the NYT piece