Mylan Laboratories will acquired Merck KGaA’s generics business for EUR 4.9 billion, or approximately $6.6 billion, in an all-cash transaction. Through the signing of a definitive agreement between the two companies, Mylan ousted a number of other contenders for Merck Generics.
Other bidders reportedly included Teva Pharmaceutical, Actavis, Torrent Pharmaceuticals, and Ranbaxy. With this win, however, Mylan lost almost 12.6% of its value to open trading at $19.58.
"Mylan's acquisition of Merck Generics would substantially complete the execution on one of its longterm visions: to create a worldclass global quality generics leader,” comments Robert J. Coury, Mylan's vice chairman and CEO. “The fit between our two companies is truly outstanding.
“Mylan is already a leader in the U.S., the world's largest market, and through Matrix Laboratories controls one of the broadest API platforms in the world,” Coury continues. “Merck Generics provides us with leading positions in many of the world's other key regions. Together we will form a powerful, diverse, robust, and vertically integrated generics platform. The combination with Merck Generics will significantly extend our range of therapeutic categories and dosage forms and bring us a number of new, differentiated products and successful franchises.”
Merck Generics reportedly has sales in more than 90 countries and more than 400 products, making it the world's number three ranked generics business according to 2006 revenues. Merck Generics had sales of EUR 1.8 billion and EBITDA of EUR 335 million in 2006, according to Mylan.
The combined company will have approximately 560 products. It also will have manufacturing capabilities in several specialized dosage forms.
Mylan expects the transaction to be dilutive to full-year cash EPS in the first year. It anticipates that it will break even in the following year and that the transaction will be significantly accretive thereafter based on management's internal projections. It predicts that by the end of the third year, the company will achieve synergies of approximately $250 million. The combined company will have an accelerated growth profile with longterm compounded net income growth expected to exceed 30% per annum and longterm revenue growth in excess of 10%, according to Mylan.