Please ensure Javascript is enabled for purposes of website accessibility

Why Forest Laboratories, Inc. Skyrocketed Today

By Brian D. Pacampara, CFA – Feb 18, 2014 at 11:08AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Is this meaningful or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Forest Laboratories, (NYSE: FRX) soared 30% today after generic-drug maker Actavis plc (AGN) acquired the specialty pharmaceutical company for about $25 billion.

So what: The cash-and-stock deal -- $26.04 in cash and 0.3306 of an Actavis share -- values Forest at $89.48 per share and represents a premium of 25% to its Friday closing price. Actavis is making the move to expand its specialty drug portfolio, and judging by its own 7% pop today, Wall Street is pleased with the price management is paying to do it.

Now what: If completed, Actavis expects the deal to be immediately accretive with the combined company generating $15 billion in annual revenue. "With this strategic combination, we create an innovative new model in specialty pharmaceuticals leadership, with size and scale, a balanced offering of strong brands and generics, a focus on strategic, lower-risk drug development, and -- most important -- the ability to drive sustainable organic growth," said Actavis Chairman and CEO Paul Bisaro. So while Forest's upside is likely limited at this point, Actavis' newly bolstered portfolio might be worth looking into. 

Brian Pacampara has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Allergan plc Stock Quote
Allergan plc

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/03/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.