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Actavis agrees to acquire Warner Chilcott for $8.5bn in stock deal

The combined company will create the third-largest US specialty pharmaceutical firm.

The US generic and over-the-counter products maker Actavis has signed a definitive agreement to acquire the UK-based specialty pharmaceutical firm Warner Chilcott in an all stock deal of approximately $8.5bn.

The deal, once completed, will create the third-largest US specialty pharmaceutical company focused on core therapeutic categories of women's health, gastroenterology, urology and dermatology with approximately $3bn in annual revenues.

The transaction will enhance Actavis’ broader portfolio and expand global footprint significantly apart from reducing its estimated 28 per cent tax rate to 17 per cent in 2013.

Paul Bisaro, president and CEO of Actavis, said: “The combination of Actavis and Warner Chilcott creates a strong speciality brand portfolio focused in therapeutic categories with strong growth potential, and it is supported by a deep pipeline of development programs.

“Paul Bisaro and his team have been executing on their vision to build a global and diverse company at the forefront of the specialty pharmaceutical industry, and the addition of Warner Chilcott should enhance the ability of the combined company to successfully execute that vision, and accelerate Actavis’ evolution.”

Ronny Gal at research firm Bernstein told the Financial Times: “As [Actavis] transitions from a small ‘smart generic’ to a mid-cap diversified pharma co, investors will need to be convinced the company is still worth betting on.”

Under the terms of the deal, at closing, Warner Chilcott shareholders will receive 0.160 shares of New Actavis for each Warner Chilcott share they own, which equates to a value of $20.08 per Warner Chilcott share based on Actavis' closing share price of $125.50 on 17 May 2013.

Roger Boissonneault, president and CEO of Warner Chilcott, said: “The Warner Chilcott team has built a powerful specialty brands business with a strong pipeline, and this compelling transaction brings together two complementary organizations with the potential to create even more value for shareholders.”

Both the companies will be combined under a new company incorporated in Ireland, where Warner Chilcott is currently incorporated. The new entity, which is expected to be called Actavis plc, or a variant thereof (New Actavis), will be led by the current Actavis leadership team.