Under pressure, Par agrees to $1.9B private equity buyout

Par Pharmaceuticals is the latest drugmaker to find its destiny changed by an activist investor. A couple of months ago, Ralph Whitworth's Relational Investors increased its stake in Par ($PRX), then told the genericsmaker to put out a For Sale sign.

Whitworth's rationale: The generics business these days is as much about size as it is about drug approvals. Successful makers of copycat drugs will need to have the manufacturing and distribution scale to take full advantage of blockbusters going off patent. Without scale, forget profit margins. So, Par needed to go big, or get sold.

Par wasted no time in finding a buyer. TPG, the Texas-based private equity group, has agreed to pay $50 per share, in a deal valued at $1.9 billion. It's a 37% premium to Par's most recent closing price. And until August 24, the company can solicit higher offers, just in case someone else wants a generics maker with, as TPG noted, "a focus on complex drugs" and a "strong, diversified product pipeline."

It's anybody's guess whether another buyer will step forward. Though Par's shares surged this morning almost to the offering price, the buyout might not be worth more to another investor-type buyer.

A fellow genericsmaker could afford more, however, provided the opportunity to squeeze costs out of the equation. And Par is far from the only smallish copycat drug company that needs to bulk up. Germany's Stada, for instance, has been facing pressure to sell out or buy--and its CEO recently said he preferred the latter.

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