- Teva has struck a cash-and-stock deal to acquire Allergan's generics drug portfolio for $40.5 billion ($33.75 billion in cash plus a 10% stake in Teva valued at $6.75 billion). Teva chief Erez Vigodman said the deal has already been cleared by both companies' boards and that his firm will end its hostile pursuit of rival Mylan. With the deal, Israel-based Teva will become one of the largest global pharmaceutical companies (its market cap could surpass Eli Lilly's) and the biggest generics firm in the world.
- Teva had been pursuing a Mylan acquisition, but the latter company rejected all offers, which hovered just above the $40 billion range.
- Mylan has been pursuing the generic drug company Perrigo with an offer in the $31 billion range. At this moment, Mylan's pursuit of Perrigo continues.
Mission accomplished: Teva has acquired Allergan's generics division—a division that includes more than 1,000 OTC and branded drugs, including generic OxyContin and generic Concerta.
Onlookers say that Teva first reached out to Allergan in February 2014, but Allergan (which was then still called Actavis) was not interested in selling its generics business, despite the fact that the companies have discussed the issue several times in the past.
As Allergan continues to consolidate after Actavis bought the company for $66 billion (and subsequently changed its name to Allergan), it continues to face roughly $44.3 billion in debt. This Teva deal could help address that debt.
For Teva, acquisition of Allergan's generics would put it into the stratosphere in terms of its position in the generics marketplace. As it stands now, the top three generics companies by sales are Teva, followed by Novartis/Sandoz and Allergan. Teva already has a market cap of roughly $60 billion.
Another piece of the puzzle is industry-wide response to the Affordable Care Act and the drive to consolidate in order to maximize health savings and minimize overhead. If this deal were to go through, Teva would definitely be gaining the scale it's after, and an even larger chunk of the $70 billion-a-year generics drug industry.
Officials from the companies say the expect the deal to close in early 2016. But there is bound to be some outcry regarding its antitrust implications, and Teva reportedly may have to sell off about half a billion dollars worth of annual assets in order for the deal to clear regulatory hurdles.