Teva in talks for Barr deal

By Lewis Krauskopf and Tova Cohen

NEW YORK/TEL AVIV (Reuters) - Teva Pharmaceutical Industries Ltd is in talks to acquire rival generic drug maker Barr Pharmaceuticals Inc BRL.N, sources familiar with the situation said on Thursday.

Few hurdles would impede a potential purchase of Barr, which saw its stock surge 22 percent as news emerged of the potential deal worth up to $7.5 billion.

Although the deal would increase Teva's leadership in the U.S. generics market, antitrust experts said such a deal would still likely win clearance after minor divestitures.

And although another suitor -- such as Novartis AG's (NOVN.VX) Sandoz unit or a large brand drug maker -- could emerge, analysts pegged the ever-acquisitive Teva (TEVA.O) (TEVA.TA) as the most logical buyer.

"Acquisitions are part of the way Teva operates and it also has done a very good job integrating them, so it would make sense," said Mike Krensavage, principal of Krensavage Asset Management LLC.

TheMarker and Globes financial newspapers reported that Israel-based Teva, the world's biggest maker of generic drugs, was in talks to buy New Jersey-based Barr in what would be a further consolidation of the generic drugs industry. Teva shares fell more than 3 percent in Nasdaq trading, closing at $41.05, down $1.36.

Spokespeople for both Teva and Barr said the companies do not comment on rumors. Teva also issued a brief statement to the Tel Aviv Stock Exchange in the wake of the reports saying "The company has no intention of reacting to rumors."

TheMarker put the price tag at $7.5 billion, citing capital market sources. That would make it Teva's biggest acquisition, surpassing the $7.4 billion purchase of U.S.-based Ivax two years ago. Globes cited a price of $7 billion to $7.5 billion.

Barr had a market value of $5.1 billion before Thursday's trading.

Valuations of recent large acquisitions of generic companies would imply a Teva-Barr deal worth roughly $8 billion, including about $1.5 billion in assumed net debt, according to analysts at Goldman Sachs.

However, if the $7.5 billion price tag cited in the Israeli reports excluded debt, it would put the price for Barr at about $69 per share.

Barr shares hit a high of $58.51 and closed at $57.17, up $10.35, or 22.1 percent, on the New York Stock Exchange.

A deal in the high $60-per-share range "would be more than fair to the Barr shareholders," Morningstar analyst Brian Laegeler said.

Recent events may be propelling this deal. Teva recently released study results showing a new dosage of its big-selling multiple sclerosis drug Copaxone was not more effective than the current version, endangering Teva's ability to extend the key franchise.

"It is possible that the acquisition is necessary and emphasizes concerns for the loss of income from Copaxone," said Gal Reiter, an analyst at Israel's Clal Finance brokerage.