The per share consideration represents a premium of approximately 25 percent per share over Forest's stock price, and a premium of approximately 31 percent over Forest's 10-day volume weighted average stock price, as of the close of trading on February 14, 2014. If successfully completed, the transaction will combine two of the world's fastest-growing specialty pharmaceutical companies, with combined annual revenues of over $15 billionanticipated for 2015.
"With this strategic combination, we create an innovative new model in specialty pharmaceuticals leadership, with size and scale, a balanced offering of strong brands and generics, a focus on strategic, lower-risk drug development, and - most important - the ability to drive sustainable organic growth," said Paul Bisaro, Chairman and CEO of Actavis. "Bolstered by one of the deepest and most diversified product portfolios in the industry with an exceptionally strong pipeline, this transaction creates a powerful engine for generating long-term, double-digit revenue and earnings growth.
"The combination of Actavis and Forest is expected to yield double-digit accretion to non-GAAP earnings in 2015 and 2016, with significant annual free cash flow generation of greater than $4 billion in 2015, enabling us to rapidly de-lever. The combination has the potential to realize approximately $1 billion in operating and tax synergies, before any manufacturing synergies or revenue synergies, while we anticipate continuing to invest over $1 billion per year in R&D."
On a pro forma combined basis for full year 2014, the combined company will have an approximately $2 billion CNS franchise;Gastroenterology (GI) and Women's Health franchises valued at approximately $1 billion each; a Cardiovascular franchise that generates approximately $500 million; and Urology and Dermatology/Established Brand franchises approaching $500 million a year in sales each.
"The combination of Forest with Actavis creates a specialty company with annual sales of approximately $15 billion, a diversified portfolio and a geographically balanced business," said Brent Saunders, CEO and President of Forest. "This compelling combination gives us more optionality to drive future growth and sustainable shareholder value due to our expanded geographic and therapeutic presence, ability to drive new product flow through R&D, strong balance sheet and consistent cash flow. The terms of the agreement provide Forest shareholders with cash and the opportunity to participate in the future growth of our new, stronger combined company.
"Forest is a great fit with Actavis due to our strong legacy in branded specialty and primary care pharmaceuticals with a best in class commercial team, a top-notch drug development organization and a long history of successful partnerships. The acquisition builds on our blockbuster line call strategy in CNS and GI and dramatically extends our reach beyond the U.S. market," added Saunders. "By joining forces with Actavis, we become more relevant to key physicians and customers through blockbuster franchises in CNS, Women's Health, GI and Urology, as well as Actavis' global generics business."
Management of the New Actavis Following Close
"In addition to being financially and commercially compelling, this transaction fundamentally transforms Actavis, positioning it for a new and even more exciting future," explained Bisaro. "In five short years, my management team has transformed Watson, and now Actavis, from a U.S. generics company to a leader on the global specialty pharmaceutical stage. Brent and his team, in a short period, have made dramatic progress in rejuvenating Forest into a leader in North American brands.
"As Chairman of Actavis, I am in a unique and enviable position of having two exceptionally experienced and successful management teams committed to creating a new future for the combined company. I am especially pleased that Brent will be joining the Actavis Board of Directors and has agreed to work with me following the close to build a world class company focused on sustainable double digit growth. Over the next several months, as we prepare for the integration and closing, our teams will define the structure necessary to capitalize on Actavis' global leadership in brand, generic, biosimilar and OTC pharmaceuticals."
The combined company will be led by Paul Bisaro, Chairman and CEO of Actavis plc. The integration of the two companies will be led by the Actavis and Forest senior management teams, with integration planning expected to begin immediately in order to assure a rapid transition to a single company following close. Actavis has agreed that three members of the Forest Board of Directors will be named to the Actavis Board of Directors following the close.
The proposed transaction has been unanimously approved by the Boards of Directors of Actavis and Forest, and is enthusiastically supported by the management teams of both companies. The transaction is subject to the approval of the shareholders of both companies, as well as customary regulatory approvals, including a Hart-Scott-Rodino review in the United States.