Barr Labs and Pliva: Round 2

So much for a nice, easy bid for Pliva. The Croatian generic drugmaker is now a hot property, as a previously spurned bidder, Icelandic generics firm Actavis, refuses to let Barr Labs (NYSE: BRL  ) win this battle yet.

Pliva management rejected Actavis' prior offers as inadequate, publicly endorsing Barr Labs instead. Since then, though, Actavis has not only tried to trump Barr Labs in price (offering $2.3 billion as opposed to Barr's original $2.2B offer), but has also been busy buying shares of Pliva in the market -- which antitrust law prohibits Barr from doing. As a result of these actions, Actavis owns nearly 10% of the shares outright and has call options on nearly another 11%.

By the same token, Barr Labs isn't giving up without a fight. It's matched the Actavis offer, and it retains a slight advantage as the Pliva board's original buyer of choice. What's more, given Pliva's valuation, Barr can probably afford to raise its price a bit more but still get decent value for its money.

This story just keeps getting weirder. In conjunction with its raised offer, Actavis stated that its bid was superior because it wasn't facing a U.S. or German antitrust review, as the Barr Labs bid must. Perhaps this was a mistranslation or misunderstanding; Actavis may have meant that its deal wasn't contingent upon securing such approval. Let me tell you, if Actavis thinks it can just ram the deal past U.S. and German regulators, it's in for a nasty shock.

Whoever Pliva lands with, it will become part of the third-largest generics company in the world. It won't send the likes of Teva (Nasdaq: TEVA  ) or Novartis' (NYSE: NVS  ) Sandoz unit screaming in fear, but the combined firm will nevertheless become a notable player.

Stay tuned. I'm betting that Barr Labs still wins the battle, but it could prove to be a much longer war.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).

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