Teva buys Allergan for $40.5 billion


UPDATE: Israel’s Teva Pharmaceutical Industries Ltd. said in a statement Monday that it has agreed to acquire Dublin-based Allergan PLC’s generic pharmaceuticals business for $40.5 billion. Teva’s statement added that the acquisition will provide its customers with affordable quality medicine and benefit Teva’s stockholders.

Earlier story:

In what seems to be a sudden shift that might have actually been a long time in the making, Israeli giant Teva Pharmaceuticals may acquire the generic drugs segment of Allergan rather than continue to pursue Mylan. Meanwhile, Allergan is buying private drug company Naurex for $560 million.

Teva has been fighting hard to take over the Dutch company Mylan, but it is now considering buying part of Allergan instead. Meanwhile, Allergan, producer of Botox, is reorganizing its business with the purchase of Naurex, which makes treatments for depression.

Brent Saunders, Allergan CEO said, “The acquisition of Naurex is a great fit for Allergan and a compelling and exciting investment. We expect Naurex will enhance Allergan’s mental health portfolio and build on our strategy to lead in an important therapeutic area.”

Teva had raised its offer by $3 billion to $43 billion in the last phase of bidding for Mylan. Mylan was fighting off the bid with its own intended purchase of Perrigo, which like Mylan, didn’t want to be taken over. A Dutch foundation bought half of Mylan to block Teva from buying it, and Teva is now in advanced talks to buy Allergan’s generic division, which was called Actavis, for between $40 – $45 billion. This isn’t necessarily a sudden move, since Teva CEO Erez Vigodman was said to have spoken with Allergan management last year and hired Sigurdur Olafsson, the past director of Actavis’ generic drug division,

Bank of Jerusalem analyst Jonathan Kreizman said, “(Teva) previously had a preference for Actavis over Mylan, but for some reason, it didn’t materialize.” Kreizman pointed out there would be less of a problem with duplicate drugs in the Teva/Allergan deal, since both Teva and Mylan were already developing versions of each others’ drugs.

Allergan, the producers of Botox, faced a long battled with activist investor Bill Ackman who wanted it to be taken over by Valeant. Eventually, Allergan accepted Activis’ offer of $66 billion, which was $13 billion more than Valeant’s bid. The loser, if this deal goes through, might be Perrigo, which was able to fend off Mylan as long as a prospective takeover of Mylan by Teva was on the table. However, if Mylan’s move to buy Perrigo was just a ploy to fend off Teva’s advances, the merger may not be bad news for Perrigo. The question that remains is what will happen to Teva’s $1.6 billion or $4.6% stake in Mylan. On the news that its takeover of Mylan won’t happen, shares are likely to fall, which means that Teva might have to sell its Mylan stake at a loss.

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