Global pharmaceutical company Actavis Actavis, which focuses on producing generic versions of name-brand prescriptions, announced Tuesday morning that it is buying the America-based Forest Labs Forest Labs in a deal worth $25 billion. As a result of the merger, shares of both companies are surging by more than $20 each in early Tuesday trading, while activist investor Carl Icahn – who is a Forest shareholder – took to Twitter and his website to declare the deal a victory for activism.
Actavis will acquire Forest for $89.48 per share, or a combination of $26.04 in cash and 0.33 Actavis shares. Executives from both companies said that if successfully completed, the merger will produce the "fastest-growing" specialty pharma company in the world, with a combined annual revenue of $15 billion in 2015.
"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," Paul Bisaro, Chairman and CEO of Actavis, said in a statement Tuesday morning. The combined company is expected to have a $2 billion central nervous system (CNS) franchise, $1 billion gastroenterology and women's health divisions and $500 million cardiovascular, urology and dermatology segments.
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Brent Saunders, Forest president and CEO, said in his own statement that Forest is a great fit with Actavis because of Forest's legacy in branded pharmaceuticals. "The acquisition builds on our blockbuster line call strategy in CNS and GI and dramatically extends our reach beyond the U.S. market," he 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."
Bisaro, current Actavis chairman, will lead the combined company, while three Forest board members will be named to the Actavis board upon the close of the deal.
Upon news of the deal, Carl Icahn took to Twitter to share his opinion on the merger:
Great result for ALL $FRX (Forest Labs) shareholders – proves again that activism works. Read more at http://t.co/kAuEwYCpdU
— Carl Icahn (@Carl_C_Icahn) February 18, 2014
Since our involvement, $FRX shrholders enjoyed gain in market value of apprx $17 bln; over 193%. Read more: http://t.co/kAuEwYCpdU
— Carl Icahn (@Carl_C_Icahn) February 18, 2014
In a more detailed note on his own website, Icahn noted that since he bought Forest shares on November 16, 2009, the stock has realized a 209% return against the S&P's 84% return during that same period. Icahn, who has been pushing for Forest growth or a Forest acquisition, said that his involvement is a "textbook" example of the value that can be created when boards work with activist investors. He acknowledged that there was much "strum und drung" to get to this point, but to quote Shakespeare, "all's well that ends well." Icahn added, "We applaud Brent Saunders, who, in less than 6 months at the helm, has helped to bring about in my opinion one of the best pharma mergers in the last decade. 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."
Following news of the deal, shares of Forest surged $23.53, or nearly 33% in pre-market trading Tuesday, while Actavis soared $21.20, or 11.05%. Shares of Icahn Enterprises, meanwhile, were enjoying a 3.97% bump. Year-over-year, Forest is up 96%, Actavis is up 126% and Icahn Enterprises is up 58%.
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