Watson Pharmaceuticals Inc announced on Wednesday that it had agreed to purchase Actavis Group. The deal is estimated at over $5.6 billion. The deal will make the company one of the biggest suppliers in the world of generic drugs and will make its international presence even bigger. The deal was first reported back in late March. Now Watson, based in the U.S., will more effectively compete against rivals Sandoz and Teva.
In recent years, the generic drug industry has seen many mergers. Much of this is due to pressure from Western governments for pharmaceuticals to provide medications at the best possible prices, which favors bigger companies that can producer drugs at much lower costs.
Per the terms of the deal, Watson will make one upfront payment in the amount of $5.6 billion. If certain performance goals are reached in 2012, shareholders for Actavis may also receive a payment with a total value of $325 million.
Watson said the complete deal would not close until sometime during the fourth quarter of 2012 and would add to earnings and cost saving immediately. Its tax would also drop from 36% to 28% said Watson officials. Nearly 40% of the revenue from generic drugs for Watson will be generated from Actavis, outside the U.S. That is an increase from the current rate of 16%.
CEO Paul Bisaro of Watson said, “In just one commercial transaction, we have been able to double our international exposure and strengthen the commercial position of the company in well established markets in Europe and exciting new emerging markets such as Russia and Eastern and Central Europe.”