Watson, Actavis to unveil deal on Wed -sources

FRANKFURT, April 23 Mon Apr 23, 2012 1:03pm EDT

FRANKFURT, April 23 (Reuters) - Watson Pharmaceuticals aims to announce an agreement to buy Actavis for around $6 billion on Wednesday, in a deal making it one of the world's biggest suppliers of generic drugs, sources familiar with the matter said.

Reuters first reported on March 21 that U.S.-based Watson was close to buying the unlisted Swiss drugmaker to help it compete more effectively against rivals like Teva Pharmaceutical Industries and Novartis unit Sandoz.

One person said on Monday that the announced price on the deal was likely to be 4.25 billion euros ($5.6 billion), which is down on the initially reported level of 5.0-5.5 billion euros.

The deal is important also to Deutsche Bank, which was left holding billions of euros of Actavis debt after a leveraged buyout in 2007 by Icelandic tycoon Bjorgolfur Thor Bjorgolfsson. Some of that debt has been written off.

It remains unclear whether Deutsche Bank will retain a stake in Actavis after the transaction.

Watson, Actavis and Deutsche Bank have all declined to comment on the talks.

Unveiling the deal on Wednesday would come a day before Deutsche Bank posts first quarter earnings. Selling down its stake in Actavis will allow Germany's largest lender to free up a capital buffer which it would otherwise need to set aside to meet tougher bank safety rules.

Sources close to the transaction said 10 days ago that banks were lining up to provide financing for Watson's acquisition, with credit likely to include a $2 billion term loan and a $4 billion bridge to bond.

The generics sector has seen a wave of M&A in recent years because Western governments are putting pressure on the industry to provide drugs at the lowest possible price, which favours large players who can produce at low costs.

Targeting Actavis is a bold move for Watson, whose previous acquisitions include the $1.75 billion purchase of Arrow Group in 2009, which established a foothold for the company in Europe, and the $1.9 billion purchase of Andrx Corp in 2006.

The purchase of Actavis would be far larger but could be made to work since there would be scope for significant synergies, including the possible closure of some manufacturing capacity in the United States.

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