Teva To Buy Allergan Generics For $40.5 Bln Cash, Stock; Shares Up

(RTTNews) - Teva Pharmaceutical Industries Ltd. (TEVA) Monday said it has signed a definitive agreement with Allergan Plc. (AGN) to acquire Allergan Generics in a cash and stock transaction valued at $40.5 billion. The stock climbed over 11 percent in pre-market activity.

The company believes the acquisition will significantly add to adjusted earnings per share, including expected double digit adjusted earnings per share accretion in 2016 and more than 20 percent accretion in year two and year three following the close of the transaction.

Allergan will receive $33.75 billion in cash and shares of Teva valued today at $6.75 billion, representing an estimated under 10 percent ownership stake in Teva.

The transaction is expected to close in the first quarter of 2016.

"The transaction will create a leader in the INN and branded generics industry with an overall product portfolio that leads the industry in terms of differentiation and durability and offers promising growth opportunities," Teva said.

Allergan Generics has a generics pipeline that holds a leading position in first-to-file opportunities in the U.S. The deal is expected to further enhance Teva's goals of delivering the highest quality generic medicines at the most competitive prices and cultivating the best development pipeline in the industry.

Teva expects Allergan Generics to contribute about $2.7 billion in Earnings Before Interest, Tax, Depreciation and Amortization or EBITDA in 2016, excluding synergies.

When the acquisition is completed, Teva expects to register pro forma sales of $26 billion and EBITDA of $9.5 billion in 2016, including an estimated $11 billion in sales outside of the U.S.

The generic drugmaker expects to achieve cost synergies and tax savings of $1.4 billion annually, largely achievable by the third anniversary of the closing of the transaction.

The company said separately that it has withdrawn its proposal to acquire Mylan N.V. (MYL). Further, the company said it plans to review its options with respect to its ownership of 4.6 percent of the outstanding ordinary shares of common stock of Mylan.

Teva said its preliminary second-quarter non-GAAP earnings per share were $1.43, up 15 percent from last year.

On average, 19 analysts polled by Thomson Reuters expected earnings of $1.31 per share for the quarter. Analysts' estimates typically exclude special items.

Revenues were about $4.97 billion, down 2 percent from the second quarter of 2014. Analysts expected revenues of $4.91 billion.

Excluding the impact of foreign exchange fluctuations and the sale of U.S. OTC plants in July 2014, revenues increased 6 percent compared to the second quarter of 2014.

Further, Teva raised its earnings view for the full year 2015, reflecting the positive momentum across the business.

For the full year 2015, the company now expects earnings per share to be in the range of $5.15 to $5.40, as compared to the previously provided outlook range of $5.05 to $5.35. Analysts look for earnings of $5.23 per share for the year.

TEVA, which closed down 1.1 percent on Friday, climbed 11.6 percent in pre-market activity.

AGN closed down 2.1 percent at $308.21 on Friday.