Mallinckrodt Pharmaceuticals to Acquire Questcor for $5.6B

Mallinckrodt plc and Questcor Pharmaceuticals, Inc. announced that they have entered into a definitive merger agreement under which Mallinckrodt will acquire Questcor in a transaction valued at approximately $5.6 billion. The transaction was unanimously approved by the Boards of Directors of both companies. Subject to customary closing conditions, the transaction is currently expected to be completed in the third calendar quarter of 2014.

Under the terms of the transaction, Questcor shareholders will receive $30.00 per share in cash and 0.897 Mallinckrodt shares for each share of Questcor common stock they own, for a total approximate consideration of $86.10 per Questcor share. Following completion of the merger,  Mallinckrodt shareholders will own approximately 50.5% and former Questcor shareholders will own approximately 49.5% of the combined company's stock. Based on the closing price of Mallinckrodtand Questcor on April 4, 2014, the total per share consideration represents a premium of approximately 27% per share over Questcor's stock price, and a premium of approximately 33% over Questcor's trailing 20-trading-day volume-weighted average price.

Highlights of Transaction

• With transaction, Mallinckrodt is expected to be an increasingly diversified, high-growth specialty pharmaceuticals company with significantly increased scale, revenues, profitability and cash flow, creating a strong platform to deliver sustainable growth and substantial value for shareholders of both companies.

• Transaction expected to be immediately accretive to Mallinckrodt's fiscal year 2014 adjusted diluted earnings per share; expected to be significantly accretive in fiscal year 2015.

• With strong cash generation, Mallinckrodt is expected to be well positioned to decrease the combined company's leverage over time.

• Questcor's high-growth H.P. Acthar® Gel is expected to be a strong complement to Mallinckrodt's broadening growth portfolio of leading specialty pharmaceutical brands, including OFIRMEV®, EXALGO® and XARTEMIS™ XR. Acthar generated net sales for Questcor of $761.3 million in calendar 2013, up 49.6% from calendar 2012. 

• Acthar is approved by the U.S. Food and Drug Administration (FDA) for 19 indications, many of which are associated with the treatment of autoimmune and inflammatory conditions.

• Questcor commercial operations will function as a separate business unit within Mallinckrodt's Specialty Pharmaceuticals segment.

Mark Trudeau, President and Chief Executive Officer of Mallinckrodt, said, "We believe this transaction will provide a strong and sustainable platform for future revenue and earnings growth, and provide exceptional value for shareholders of both Mallinckrodt and Questcor. It will substantially increase the scale, diversification, cash flow and profitability of our business, while expanding and enhancing the breadth and depth of our specialty pharmaceutical platform.  With Questcor, combined with our recently completed acquisition of Cadence Pharmaceuticals, the new Mallinckrodt will have a significant, established presence with prescribers, payers and hospitals. We will also have an increasingly diversified specialty pharmaceuticals portfolio, which will include novel therapeutics for pain management, as well as central nervous system, renal, rheumatologic and other autoimmune and inflammatory disorders."

"After significant due diligence, we have concluded that Questcor is another ideal strategic fit with Mallinckrodt," Trudeau continued. "Questcor's expertise and proprietary manufacturing know-how has allowed the company to provide patients with a unique product that addresses some of the most complex and challenging therapeutic areas within specialty medicine. Acthar is increasingly being employed by specialty physicians in the treatment of a range of serious, difficult-to-treat autoimmune and inflammatory conditions, where patients often have exhausted other good therapeutic options. With the exceptional talent and expertise Questcor brings, combined with the financial strength, portfolio breadth and geographic reach of the combined company, we believe we are now well on our way to becoming a leader in the development and commercialization of specialty therapeutics around the world."   

Don M. Bailey, President and Chief Executive Officer of Questcor, said, "This transaction will create substantial value for our shareholders, employees, customers and patients. The cash and equity structure of the merger will allow our shareholders to realize significant and immediate value, and with approximately 49.5% ownership of the combined company our shareholders will also be able to participate in the growth and value creation that we believe the combined company is poised to deliver."

"Like Questcor, Mallinckrodt has significant experience and expertise in managing medicines in highly regulated, complex markets," Bailey continued. "I strongly believe Mallinckrodt is the right partner to support the continued growth of Acthar in the highly specialized markets that we serve. The increased cash flow and scale of operations of a combined Questcor/Mallinckrodt organization will provide an even stronger platform to support the expansion of Acthar into new therapeutic areas. Questcor commercial operations will function as a separate business unit within Mallinckrodt, and given the complementary nature of our businesses and product portfolios we expect this to be a seamless transaction. We look forward to becoming an important part of this exciting new company."