The combined business will have $4.2 billion in annual sales. With generics accounting for a little more than half of those sales, seventh-ranked Par and ninth-ranked Endo together will become the fifth-largest generics firm in the U.S.
“This transaction with Par builds upon our generics growth, adding a strong portfolio of high barrier-to-entry and attractive gross margin products,” Endo Chief Executive Officer Rajiv De Silva said when announcing the deal. Endo expects to cut costs by $175 million but is “committed to maintaining a robust R&D program at Par to support future growth,” he added.
The move continues an acquisition spree for Endo. In early 2014, Endo moved its headquarters to Ireland through a tax inversion deal with Paladin Labs. Since then, it has bought three small companies but was thwarted in an $11 billion bid to buy Salix Pharmaceuticals when Valeant Pharmaceuticals made a higher offer.
Endo’s offer for Par includes $1.6 billion in stock, $4.1 billion in cash, and the assumption of $2.4 billion in debt. Par’s current owner, the investment firm TPG, is set to make a substantial profit. In late 2012, TPG acquired Par for $1.9 billion. It will probably own less than 10% of the combined company.
Endo is paying “a significant premium” for Par, notes Jeffrey Loo, a stock analyst with S&P Capital IQ. But despite the sizable outlay, “Endo, with its lower tax base since redomiciling in Ireland, will pursue more acquisitions,” he predicts.
The generic drug area has been rife with merger and acquisition moves. The most recent one is Teva Pharmaceutical Industries’ hostile $40 billion bid for Mylan. At the same time, Mylan has been pursuing an acquisition of Perrigo, which has rejected the idea thus far.
In contrast, the Endo-Par transaction was unanimously approved by the boards of the two companies, supported by both sides’ management, and requires no further shareholder approval to close.