Pennsylvania-based Endo International Plc. (ENDP, Financial) announced its acquisition of Par Pharmaceuticals Holdings Inc. (PRX, Financial) for $8 billion from its current owner, private equity firm TPG Capital. The deal will be inclusive of debt and will make Endo among the top five generic drug makers by sales in the United States of America.
Benefitting Endo
Counted among the global specialty healthcare companies, Endo pharmaceutical was created through a management buyout from DuPont (DD, Financial) Merck (MRK, Financial) in 1997. On the other hand, the New Jersey-based Par Pharmaceutical develops manufactures and markets generic and branded specialty pharmaceuticals after its inception in 1978.
The company was acquired by TPG capital in 2012 for $1.9 billion and since after, it started to concentrate on making generics, which are generally considered difficult to make and administer, though they have higher margins. This clause is going to reap benefits for Endo now as it has taken over the company from TPG. Also, Endo will have ownership on five manufacturing plants and approximately 100 generic drugs of Par Pharmaceuticals among which there are two bestseller drugs as well- Entocort-A copy of AstraZeneca’s Crohn’s disease treatment and Lovaza one among GlaxoSmithKline’s (GSK, Financial) cholesterol drug.
Market situation of Endo and Par
Post its acquisition by TPG, Par pharmaceuticals had witnessed improved performance as was with other acquired companies of TPG. This was also partly due to increased M&A activities in the industry, which had led to increased valuations. The company had also seen a jump of 20% in its sales to $1.28 billion in 2014 and had filed for a U.S. Initial Public Offering in March.
At the same time, Endo Pharmaceuticals had also experienced a boost in its Generics business with sales touching a high of 56% as against the total revenue growth of just 10%. This was partly as a result of acquisitions done by the company and further made the company take a decision on acquiring Generics specialist Par Pharma.
The high-profit generics market
The trend was present worldwide. The generics market across the globe was getting great response and was worth $74 billion in 2014. The trend is set to continue as the market is set to grow 6.3% annually in the next six years as per EvaluatePharma a market research firm. This makes it clear why so many deals are happening round the companies doing business in the said industry. For instance, number one generic drugmaker Teva Pharmaceutical Industries Ltd (TEVA, Financial) made a bid of $43 billion for Mylan (MYL, Financial), which in turn is trying to takeover Perrigo Co. Plc. (PRGO, Financial). The continued growth in the generic drug market is booming as of now. Endo in the past as well had entered several other deals included six completed ones in 2013, though its last bid offer to buy Salix Pharmaceuticals Ltd. (SLXP, Financial) in March fell short of Valeant Pharmaceuticals International Inc.’s (VRX, Financial) bid.
Deal’s particulars
Although shares of Endo fell 5% to $80.93 in the afternoon trading, the company is firm on its decision to buy Par Pharmaceuticals by issuing $4.5 to $5.0 billion of new debt as part of funding of the deal. The company is also offering 18 million shares as well as $6.50 billion in cash.
For Endo, the financial advisors were Barclays (BCS, Financial), Deutsche Bank (DB, Financial) and Houlihan Lokey; whereas JP Morgan (JPM) had been advising Par Pharmaceuticals. For Legal advice, Endo approached Skadden, Arps, Slate, Meagher & Flom LLP while Par went to Ropes & Gray LLP.
