Go big or go home. That might have been what Teva Pharmaceutical
Teva is paying for the Motley Fool Stock Advisor recommendation with a combination of cash and stock. Each share of Barr will be converted into $39.90 in cash and 0.6272 of a Teva ADR. That's a hefty $7.5 billion, based on Teva's closing price on Wednesday -- the day before news leaked that a deal was likely. And it's three times annual revenue, slightly higher than the going rate in recent years and higher than what Barr paid when it acquired Pliva two years ago.
Acquirer |
Target |
Price-Revenue Multiple |
---|---|---|
Barr |
Pliva |
2.5 |
Mylan |
Merck's generics |
2.7 |
Stada |
Hemofarm |
2.7 |
Novartis |
Hexel/Eon |
3.9 |
Mylan |
Matrix |
2.8 |
But Barr has quite a few brand-name products that fetch higher margins, so perhaps Teva's attempted buyout of King Pharmaceuticals
The acquisition would also put Teva well ahead of the competition in the area of women's health, where Barr is a leader. And through Pliva, it would give Teva a foothold in Eastern Europe, which is seen as a growth market compared with the U.S. Although generics as a percentage of prescriptions sold in the U.S. increased to 63.7% last year from 59.7% the year before, the average price of generics fell by more than 3%, according to pharmacy benefits manager Express Scripts
Teva's stock has rebounded today after investors had sent it down on the buyout rumors, but the company might feel pressure in the long term because these mega-mergers tend to weigh heavily on the acquirer. Before the buyout rumors, Barr's stock was off about 15% from when it bought Pliva, and Mylan is down 35% since its costly bid for Merck's generic business.
Yet according to industry researchers at IMS Health, products going off patent in 2008 are expected to total about $20 billion in sales, and that number is only going to grow the rest of the decade. In 2011, Pfizer's
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