Actavis will snap up Forest Laboratories for $25 billion, the companies said today, in a blockbuster deal that marries two growing specialty pharma portfolios, caps a two-year buying spree for the purchaser—and delivers a victory for Forest Labs’ second-largest shareholder, activist Carl Icahn, after four years of sparring with the company to either acquire or be acquired.

The combined company will launch with $15 billion in annual sales anticipated for 2015. Of that total, $2 billion will come from its franchise of central nervous system drugs, with another $1 billion each from its gastroenterology and women’s health treatments, roughly $500 million in cardiovascular medicines, and close to $500 million in sales from its urology and dermatology/established brand franchises.

To those established franchises, Actavis-Forest Labs says it will also add emerging and sustainable drug portfolios in other therapeutic categories—including infectious disease, respiratory, cystic fibrosis, and dermatology. Not to mention Actavis’ traditional strength in generic drugs, where it is the second-largest company in that category by market value.

On a pro forma combined basis for full-year 2014, the combined company will have an approximately $2 billion CNS franchise; gastroenterology 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.

“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.”

Bisaro will lead the combined company, saying that Forest Labs CEO and president Brent Saunders had agreed to work with him in building the combined company, whose board Saunders will join, along with three members of Forest Labs’ board, following the close of the deal. The boards of both companies have approved the acquisition deal, which is subject to shareholder approval by both companies as well as regulatory approvals that include a Hart-Scott-Rodino review in the United States.

Saunders called Forest “a great fit” with Actavis given his company’s legacy in branded specialty and primary care pharmaceuticals, its commercial and drug development teams, and its 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,” Saunders said. “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.”

By acquiring Forest Labs, Actavis caps a multiyear buying spree that included its acquisition and renaming of U.S.-based Watson Pharmaceuticals for €4.25 billion ($7.1 billion) in 2012. Last year, the renamed Actavis added to its specialty pharma operations by snapping up Irish-based Warner Chilcott for about $8.5 billion in a stock-for-stock deal completed October 1.

At $89.48 per share of Forest Labs stock—$26.04 cash plus 0.3306 Actavis shares—Actavis is paying a 25% per-share premium above Forest’s stock price, and about 31% above Forest’s 10-day volume-weighted average stock price, as of the close of trading on February 14, 2014.

Among the biggest winners in the deal is Icahn, whose Icahn Group owns 11.5% of Forest Labs shares. Icahn began snapping up Forest Labs shares in 2009, when they traded at about $29 a share and the company was looking to rebound from patent-cliff losses of drugs about to lose protection—namely the antidepressant Lexapro and the Alzheimer’s drug Namenda. Since then, according to Icahn, Forest Labs shareholders enjoyed a near tripling (193% or nearly $17 billion) of aggregate gain in market value.

The dispute over Forest Labs’ future led to proxy battles in 2011 and 2012, the latter ending when an Icahn director was among four named to the board. A third proxy battle was averted last year via a settlement that called for the election to the Forest Labs board of an Icahn representative, Vincent Intrieri, in return for Icahn voting for the full slate of directors endorsed by the company.

The new board ultimately ended the annual proxy battles with Icahn by appointing Saunders, the former Bausch & Lomb CEO, as chief executive of Forest Labs in September 2013. Earlier that year, Saunders steered B+L toward acquisition by Valeant Pharmaceuticals for $8.7 billion, only to be relegated to an advisory role for that combined company once their deal was done.

In a statement today, Icahn credited Saunders for the change in company attitude toward pursuing Forest Labs’ acquisition.

Saunders has shown his own knack for quick dealmaking, having steered Forest Labs to acquire Aptalis—whose specialty drugs include cystic fibrosis and GI treatments—for $2.9 billion from TPG in a deal completed last month. At the time, Saunders told the Financial Times he had a “long list” of potential deals intended to boost his company’s portfolio.

“To quote Shakespeare, ‘All’s well that ends well,’ and we applaud Brent Saunders, who, in less than six months at the helm, has helped to bring about in my opinion one of the best pharma mergers in the last decade,” Icahn stated. “I as one of the largest shareholders of Forest can only say thank you—and thank you as well to the entire board and management team for delivering this terrific result.”

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