UPDATE 1-Actavis pulls out of auction for Merck KGaA unit
(Updates with Actavis confirmation of initial Reuters report)
By Jeffrey Goldfarb and Ben Hirschler
LONDON, May 3 (Reuters) - Iceland's Actavis ACT.IC said on Thursday it had dropped out of the auction for the generic drugs unit of Germany's Merck KGaA (MRCG.DE) because the price was too high.
Confirming an earlier Reuters report, Actavis said it had decided not to proceed to the next stage of the bidding process.
Shortlisted bidders still in the running for the business, which is expected to fetch about 4.5 billion euros ($6.1 billion), include Teva Pharmaceutical Industries Ltd. (TEVA.O) of Israel and U.S.-based Mylan Laboratories Inc. MYL.N.
A private equity team of Bain Capital and Apax Partners may also still be in the hunt, according to people familiar with the situation.
Two finalists are expected to be selected from the current bidding process, with a final decision expected by mid- to late-May.
Actavis has been an aggressive buyer of smaller generic drugmakers in recent years but has now failed twice in clinching a major deal. Last year it lost out to U.S.-based Barr Pharmaceuticals Inc. BRL.N in a battle for Croatian drugmaker Pliva.
The Icelandic group said it had identified significant potential synergies from buying the Merck operation but they were not enough to justify the likely purchase cost.
"The board of Actavis considers that at the price levels that Actavis understands are being offered for the division by other bidders, the transaction would not produce value for Actavis's shareholders," it said in a statement.
Actavis would continue to evaluate other acquisition opportunities to keep it at the forefront of the industry, it added.
RAPID CONSOLIDATION
The global generic drugs industry has seen rapid consolidation recently, as players seek increased scale to compete on price in major markets, where unpatented medicines are taking an increasing share of prescriptions.
The wave of mergers has helped drive up prices for the few assets still available.
The Merck generics operation, which is no longer core to the German firm after its acquisition of Swiss biotech company Serono, is seen as a prize asset because of its foothold in many markets.
Merck's sales of generic medicines totalled some 1.8 billion euros in 2006, ranking the unit fourth in the world behind Teva, Novartis AG's (NOVN.VX) Sandoz unit and Barr.
It sells more than 400 drugs across all therapeutic areas in Europe, North America, Australia, Brazil and South Africa.
Merck Chief Executive Michael Roemer said last Friday that a final decision on selling the unit was still pending but a divestment clearly made sense for the future of the pharmaceuticals and chemicals group.
Investment bank Bear Stearns is handling the sale on behalf of Merck.
((Reporting by Jeffrey Goldfarb and Ben Hirschler; Editing by Matthew Tostevin; Reuters Messaging: jeffrey.goldfarb.reuters.com@reuters.net, tel: +44 207 542 8793, email: jeffrey.goldfarb@reuters.com))
($1=.7345 Euro) Keywords: ACTAVIS MERCK/
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