Generic drug king Teva to buy Barr in $7.46bln deal

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(AFP)

WASHINGTON (AFP) - Israel's Teva Pharmaceutical Industries Ltd, the world's largest generic drug company, is to buy US rival Barr Pharmaceuticals in a 7.46 billion dollar deal, the companies said Friday.

The takeover of Barr, the fourth largest generic drug company worldwide, would widen Teva's dominance in the US market, where generic drugs are increasingly in demand amid soaring health-care costs.

It also was expected to "significantly" strengthen Teva's position in key European and central and eastern European markets, the companies said in a joint statement.

Teva offered 39.90 dollars and 0.6272 of Teva's American Depositary Receipts for each share of Barr.

Based upon the Nasdaq closing price of Teva's ADRs on Wednesday, the offer values Barr at 66.50 dollars a share, representing a 42 percent premium on its closing price Wednesday, they said.

Under the terms of the agreement, Teva also will assume Barr's net debt of approximately 1.5 billion dollars.

"The acquisition of Barr will elevate Teva's market leadership to a new level," Shlomo Yanai, president and chief executive of Teva, said in the statement.

"The combination of our two companies provides an outstanding opportunity strategically and economically: It will enhance our market share and leadership position in the US and key global markets, further strengthen our portfolio and pipeline, and provide upside to our strategic plan."

The companies said their boards of directors had unanimously approved the acquisition, which is subject to approval by Barr shareholders and regulatory and other reviews.

The friendly takeover is expected to close in late 2008 and contribute to Teva earnings a year later.

The combined company would operate directly in more than 60 countries and employ some 37,000 people worldwide.

Teva said it anticipates the acquisition will generate at least 300 million dollars in cost savings within three years.

The Israeli company also said the combined company would allow it to exceed its five-year strategic plan, which was to double revenues by 2012 to 20 billion dollars, with net income margins of at least 20 percent.

In 2007, Teva had revenue of 9.4 billion dollars and Barr had 2.5 billion.

Moody's reaffirmed Teva's ratings and said it was placing Barr's ratings under review for possible upgrade, saying the deal was "further establishing Teva as the preeminent global generic pharmaceutical company."

"Moody's affirmed Teva's investment grade rating because of sound strategic rationale for acquiring Barr, significant equity funding and cushion in the existing credit metrics," Michael Levesque, Moody's senior vice president, said in a statement.

Teva develops and markets branded as well as generic drugs. Eighty percent of Teva's sales are in North America and Europe.

Barr Pharmaceuticals, Inc. operates in more than 30 countries and has a portfolio of 150 drugs and 70 in development. Its own brand of contraceptives holds nearly 20 percent of the US market.

Teva and Barr have been partners since 2005 in the manufacture of a generic anti-allergy drug, Allegra-D.

The deal is the latest in Teva's buying spree, amid consolidation in the fast-growing generic drugs sector.

The Israeli giant this year bought US firm CoGenesys, a biogenetic drugs specialist, for 400 million dollars, and is awaiting approval from shareholders for its 360-million-dollar bid for the generic drugs division of US firm Bentley Pharmaceuticals.

Barr itself was bought by Pliva, a Croatian company, for 2.5 billion dollars in 2006.