TPG backed Par Pharma sold in $8bn deal


Financier Worldwide Magazine

August 2015 Issue

August 2015 Issue

Irish pharmaceutical firm Endo International Plc has agreed to acquire rival Par Pharmaceutical Holdings Plc in a deal worth around $8bn, including the assumption of $2.35bn worth of existing debt. The deal will see US based private equity firm TPG Capital exit the firm it acquired for $1.2bn in 2012, following a protracted four year pursuit.

TPG is responsible for retooling Par Pharmaceutical’s offerings, shifting the company’s focus toward generic pharmaceutical products which, while harder to manufacture, offer significantly higher margins. According to a statement announcing the transaction, the merger has been unanimously approved by the boards of directors of both Endo and Par, and is supported by the management teams of both companies. There are no further shareholder approvals required. The deal is expected to close during the second half of 2015.

The acquisition will see Endo offer approximately 18 million shares, the value of which is around $1.55bn, based on the 10-day volume weighted average share price ending on 15 May of Endo equity, and $6.50bn cash consideration to Par shareholders. As a result, despite holding the company for less than three years, TPG will secure a return of around $5bn, or 6.5 times its initial investment – the largest recorded by the firm.

TPG is currently in the midst of a transformation. The firm which manages around $67bn worth of assets in private equity, credit and real estate investments, is in the process of closing a new buyout fund. However, it is still recovering from a series of money-losing investments during the buyout boom and financial crisis. In recent years, TPG has seen its investments in Texas utility company Energy Future Holdings Corp and savings bank Washington Mutual effectively wiped out. The company is also a significant stakeholder in Caesars Entertainment Corporation, the future of which is in doubt since the company’s largest unit was placed into Chapter 11 bankruptcy.

Before the sale of Par to Endo International materialised, TPG was planning on taking the company public. Indeed, in March TPG filed paperwork relating to an IPO, with amendments to that documentation made as late as early May. “Over the last three years, we have enjoyed partnering with the Par team to create a more diversified company with expanded capabilities, an enhanced product pipeline and more robust business development opportunities, all resulting in significant growth,” said Todd Sisitsky, managing partner of TPG Capital North America. “The success of Par, in part, reflects our continued focus and operational expertise in the growing healthcare industry. It has been a pleasure to invest in such a great company and support Par’s outstanding management team as they have grown and diversified their business. As part of Endo, Par will be well-positioned to drive future growth and we look forward to continuing to participate in the company’s next chapter of success.”

Rajiv De Silva, president and CEO of Endo, said in a statement: “This transaction with Par builds upon our generics growth, adding a strong portfolio of high barrier-to-entry and attractive gross margin products while also transforming Endo, creating a powerful corporate platform for future growth and strategic M&A.” By acquiring Par, Endo takes over management of five manufacturing plants and about 100 generic drugs, including Par Pharma’s two bestsellers – a copy of AstraZeneca’s Crohn’s disease treatment, Entocort, and one of GlaxoSmithKline’s cholesterol drug, Lovaza.          

M&A activity in the pharmaceuticals sector is in a boom period. Recent activity in the space has had a considerable effect on valuations, pushing them skywards. Par Pharma’s own valuation was significantly improved by recent acquisitions the firm made under TPG’s ownership. In 2014 it recorded a 20 percent jump in sales, climbing to $1.28bn. According to data from EvaluatePharma, the worldwide generics market, which was worth an estimated $74bn in 2014, is expected to grow 6.3 percent annually over the next six years.

Endo has also been active in recent years, completing six deals since 2013. However, the company was defeated in its attempts to acquire Salix Pharmaceuticals Ltd earlier this year, when it was sold to Valeant Pharmaceuticals International Inc for $11.1bn.

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Richard Summerfield

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