Teva to buy Allergan Generics in $40.5bn deal

BY Fraser Tennant

Teva Pharmaceutical Industries Ltd has announced that it has signed a definitive agreement to acquire Allergan Generics in a $40.5bn transaction.

The acquisition - which some analysts are describing as the largest carried out by an Israeli company - brings together two leading generics businesses with complementary strengths, brands and cultures, and will provide patients with greater access to affordable, quality medicines.

Once the acquisition is complete, Teva, which reported net revenues of $20.3bn in 2014, will become one of the largest drug manufacturers in the world.

To be financed through a combination of new equity, debt financing and cash on hand, upon closing, Allergan will receive $33.75bn in cash and shares of Teva valued today at $6.75bn – an estimated under 10 percent ownership stake in Teva.

“This transaction delivers on Teva’s strategic objectives in both generics and specialty,” said Erez Vigodman, president and CEO of Teva. “Through our acquisition of Allergan Generics, we will establish a strong foundation for long-term, sustainable growth, anchored by leading generics capabilities and a world-class late-stage pipeline that will accelerate our ability to build an exceptional portfolio of products – both in generics and specialty as well as the intersection of the two."

In sharing a commitment to patient safety and quality, Teva and Allergan aim to create a company which will transform the global generics space all over the world.

"This transaction will accelerate Allergan's evolution into a branded Growth Pharma leader, enable a sharpened focus on expanding and enhancing our global branded pharmaceutical business and strengthen our financial position to build on our proven track-record of value creation led by effective capital deployment," said Brent Saunders, CEO and President of the Dublin-based Allergan.

“We will have the potential to add scale in existing therapeutic areas, expand into new therapeutic areas and geographies and evaluate strategic transformational deals as we continue to build on our position as the most dynamic branded growth pharma company.”

The financial advisers for Teva during the transaction were Barclays and Greenhill & Co, while Sullivan & Cromwell LLP and Tulchinsky Stern Marciano Cohen Levitski & Co served as legal counsel. For Allergen, J.P. Morgan is acting as sole financial adviser and Latham & Watkins LLP is serving as lead legal adviser.

The Teva/Allergan transaction has been unanimously approved by the board of directors of both companies and is expected to close in the first quarter of 2016.

Mr Vigodman concluded: “We look forward to delivering the benefits of this transaction to our stockholders, and better serving patients, customers and healthcare systems throughout the world.”

News: Teva to buy Allergan generic business for $40.5 billion, drops Mylan bid

Anthem poised to acquire Cigna in $54.2bn insurance industry megadeal

BY Fraser Tennant

Anthem Inc. and Cigna Corporation have announced that they have entered into a definitive agreement whereby Anthem will acquire all Cigna’s outstanding shares in a transaction valued at $54.2bn - the largest deal ever seen in the history of the insurance industry.

The combined health services company will cover approximately 53 million medical members with well positioned commercial, government, consumer and specialty businesses, along with a market-leading international franchise.

“We are very pleased to announce an agreement that will deliver meaningful value to consumers and shareholders through expanded provider collaboration, enhanced affordability and cost of care management capabilities, and superior innovations that deliver a high quality health care experience for consumers," said Joseph Swedish, president and chief executive of Anthem.

Expected to become an industry leader due to enhanced diversification capabilities, the united companies will utilise their complementary strengths, including Anthem’s Blue Cross and Blue Shield footprint in 14 states (and Medicaid footprint via its Amerigroup brand in 19 states) with Cigna’s US and global portfolio of health and protection services.

Mr Swedish continued: “We believe that this transaction will allow us to enhance our competitive position and be better positioned to apply the insights and access of a broad network and dedicated local presence to the health care challenges of the increasingly diverse markets, membership, and communities we serve.”

Upon close of the transaction, Mr Swedish will serve as chairman and chief executive of the new entity. David Cordani, currently Cigna’s president and chief executive, will take on the role of president and chief operating officer. Additionally, and effective upon close of the transaction, the Anthem board of directors will be expanded to 14 members with Mr Cordani and four independent directors from Cigna’s current board joining Anthem’s.

“Our companies share proud histories and an even brighter future," said Mr Cordani. “Going forward our new company will deliver an acceleration of innovative and affordable health and protection benefits solutions that help address our health system's challenges and provide supplemental insurance protection, and health care security to consumers, their families, and the communities we share with them.”

Cigna’s financial and legal advisers for the transaction are Morgan Stanley and Cravath, Swaine & Moore LLP, respectively. For Anthem, the financial advisers were UBS Investment Bank and Credit Suisse with White & Case LLP serving as legal adviser.

Although the transaction is expected to close in the second half of 2016, regulatory scrutiny may delay consummation of the deal for a year at least. Adding to concerns is Anthem and Cigna’s lower opening on the New York Stock Exchange following the announcement of the transaction - lost ground which both companies may struggle to regain.

News: Anthem to buy Cigna for $54B in mega insurance merger

Lockheed to buy Sikorsky for $9bn

BY Richard Summerfield

Lockheed Martin Corp announced this week that it had agreed to acquire military and commercial rotary-wing aircraft manufacturer Sikorsky Aircraft from United Technologies Corporation in a deal worth $9bn. The price of the deal will effectively be reduced to around $7.1bn once the tax benefit resulting from the transaction is taken into account.

The transaction, which is subject to the customary closing conditions including regulatory approval, is expected to be completed in Q4 2015 or Q1 2016. “Sikorsky is a natural fit for Lockheed Martin and complements our broad portfolio of world-class aerospace and defence products and technologies,” said Marillyn Hewson, Lockheed Martin’s chairman, president and chief executive in a statement announcing the deal. “I’m confident this acquisition will help us extend our core business into the growing areas of helicopter production and sustainment. Together, we’ll offer a strong portfolio of helicopter solutions to our global customers and accelerate the pace of innovation and new technology development.”

By completing a deal for Sikorsky, Lockheed - the Pentagon’s largest arms supplier - has secured its position as the world’s largest defence company, overshadowing rivals including the defence business of Boeing Co and Northrop Grumman Corp.

Sikorsky manufactures a range of military helicopters, including the Black Hawk, which is utilised by 25 nations for multi-mission support, and the Seahawk, used in marine operations. The company also makes commercial helicopters and fixed-wing aircraft for surveillance and transport missions.

“Exiting the helicopter business will allow UTC to better focus on providing high-technology systems and services to the aerospace and building industries, and to deliver improved and sustained value to our customers and shareowners,” United Technologies president and chief executive Gregory Hayes said in a separate statement.

In addition to the Sikorsky deal, Lockheed also announced a better than expected 4.5 percent rise in quarterly profit this week. The company also said it could spin off or sell its government IT and technical services businesses going forward.

News: Lockheed to buy Black Hawk maker Sikorsky for $9 billion

Celgene and Receptos agree $7.2bn merger

BY Richard Summerfield

On 14 July, Celgene Corp announced that it had agreed to acquire Receptos Inc in a deal worth approximately $7.2bn. The deal continues the trend of major M&A deals in the healthcare sector which has seen more than $250bn worth of M&A since January.

According to the terms of the deal, Celgene will pay $232 per share to acquire Receptos. The agreed price represents a 12 percent premium to the company’s closing price on the day the deal was announced. The transaction was made public after the markets had closed.

By acquiring Receptos, Celgene has gained access to the company’s valuable pipeline of products, most notably its treatment for multiple sclerosis and ulcerative colitis, ozanimod. The drug is currently in late-stage clinical trials with approval possible in 2018 for multiple sclerosis and the following year for ulcerative colitis. According to data from Celgene, ozanimod could generate peak sales of around $6bn annually.

“The Receptos acquisition provides a transformational opportunity for Celgene to impact multiple therapeutic areas,” said Robert J. Hugin, chief executive of Celgene, in a statement announcing the deal.

Celgene too has an impressive portfolio of products, the most prominent of which is the company’s blockbuster cancer treatment Revlimid.

As a result of deal speculation, Receptos has seen its market value nearly double since the turn of the year. AstraZeneca, Gilead Sciences and Teva were all rumoured to be interested in acquiring the company, although none were able to agree a deal.

For Celgene, the acquisition represents business as usual. The company has developed a reputation for M&A transactions to buy up smaller companies or licence their product lines. In 2014, the firm paid $710m to Irish firm Nogra Pharma to gain access to GED-03010, a treatment for Crohn’s disease. In June, the company invested $1bn in Juno Therapeutics, an organisation which manufactures experimental cancer medication.

According to Celgene’s statement, the deal for Receptos will impact the company’s earnings per share up to and including 2017. It will be neutral to earnings per share the following year and add to earnings from 2019 onwards. Celgene intends to finance the deal via a combination of existing cash on hand and new debt. The company intends to raise around $5bn in a bond offering in August.

The deal is expected to close in the second half of 2015.

News: Celgene to buy Receptos for $7.2bn; gains promising drug

$18bn merger sees Willis Group and Towers Watson become one

BY Fraser Tennant

Willis Group Holdings and Tower Watson have announced that they are to merge in an $18bn transaction that will create a major integrated global advisory, broking and solutions provider.

The signing of a definitive merger agreement between the pair - two highly complementary businesses combining in an all-stock merger of equals transaction – will, they say, "create an integrated global platform to drive long-term growth and market share gain in traditional and new businesses".

Upon completion of the merger, Willis shareholders will own approximately 50.1 percent and Towers Watson shareholders will own approximately 49.9 percent of the combined company on a fully diluted basis. The combined company will be named Willis Towers Watson.

The combination is also expected to result in a $100-125m cost saving within three years of closing – due mainly to increased efficiencies and the elimination of duplicate corporate costs and economies.

“These are two companies with world-class brands and shared values," said Dominic Casserley, CEO of Willis. “The rationale for the merger is powerful – at one stroke, the combination fast-tracks each company’s growth strategy and offers a truly compelling value proposition to our clients. Together we will help our clients achieve superior performance through effective risk, people and financial management. We will advise over 80 percent of the world’s top-1000 companies, as well as having a significant presence with mid-market and smaller employers around the world.”

Unanimously approved by both the board of directors of both companies, the combined entity will have approximately 39,000 employees in over 120 countries. 

“Our organisations share a client-first mentality and a focus on providing services and solutions that consistently exceed clients’ expectations," said John Haley, chairman and chief executive of Towers Watson. “As we bring these two companies together, we are confident associates across both organisations will enjoy increased development opportunities as part of a stronger and more global growth company.”

In terms of the leadership structure of Willis Towers Watson, James McCann (previously non-executive chairman of the Willis board) will become chairman; John Haley will be chief executive and Dominic Casserley will be president and deputy CEO. The board will consist of 12 directors in total: six nominated by Willis and six by Towers Watson.

Mr Casserley said: “We look forward to bringing Towers Watson’s innovative solutions to our clients alongside our broking and advisory services. The opportunity to deliver significant savings to our growing middle market client base with Towers Watson’s market-leading private exchange platform is particularly attractive.”

News: Willis Group and Towers Watson merge in $18bn deal