Teva Pharmaceutical Industries (NYSE:TEVA), an Israeli drugmaker, agreed to buy Dublin-based Allergan PLC's (NYSE:AGN) generic pharmaceuticals business for $40.5 billion in cash and stock, and dropped its hostile offer for Mylan (NASDAQ:MYL).
Teva will pay $33.75 billion in cash and $6.75 billion worth of shares at today’s price, or about 10 percent of the enlarged company, the Petach Tikva, Israel-based company said in a statement today. Teva said it plans to review its options with respect to the approximately 4.6 percent of Mylan stock that it owns.
The deal, the largest in Israel's corporate history, bolsters Teva’s position as the world’s largest maker of generic drugs, and gives it greater negotiating power with governments and private-health insurers.
"Through our acquisition of Allergan Generics, we will establish a strong foundation for long-term, sustainable growth, anchored by leading generics capabilities and a world-class late-stage pipeline that will accelerate our ability to build an exceptional portfolio of products - both in generics and specialty as well as the intersection of the two," Teva’s chief executive officer Erez Vigodman said in the statement.
The deal, which is expected to close in the first quarter of 2016, could give the combined company a market value exceeding that of Lilly, which stood at $94 billion on Friday.
Teva also said Monday that it expected to report better-than-expected sales and earnings for the second quarter ended in June. The company projected earnings excluding certain items of $1.43 a share on revenue of $4.97 billion, down 2 percent from a year ago but up 6 percent excluding the impact from currency changes. Analysts, on average, were expecting earnings of $1.31 a share on sales of $4.92 billion.
For 2015, Teva raised its per-share earnings forecast to a range of $5.15 to $5.40, from its previous range of $5.05 to $5.35. Analysts were expecting per-share earnings of $5.20.
ADRs of Teva jumped 8.5 percent to $67.17 at 9:56 a.m. in New York. Shares of Mylan fell 14 percent to $56.56. Shares of Allergan rose 5.5 percent to $326.02.
The Allergan acquisition is the latest in an unprecedented wave of healthcare deals since the start of 2014, stretching from large drugmakers buying up smaller rivals, to consolidation among makers of generic medicines, to tie-ups between insurers.
Global healthcare M&A so far this year reached $398.5 billion as of July 23, up 80 percent on a year ago, according to Thomson Reuters data.
The second-largest U.S. health insurer, the Blue Cross-Blue Shield carrier Anthem Inc., is buying rival Cigna for $48 billion in a deal that would make it the nation's biggest insurer by enrollment. Aetna Inc., the nation's third-largest insurer, also plans a $35 billion bid for Humana Inc.