Kraft's shock bid triggers Unilever focus on short-term value
Kraft Heinz's bid has jolted Unilever into focusing more on delivering on its strategy in the short-term, the Anglo-Dutch company's finance chief said on Friday.
BANGALORE Endo Pharmaceuticals Holding Inc moved to reduce its dependence on its branded products that face generic threats by buying urological devices maker American Medical Systems Holdings Inc for $2.6 billion.
Chadds Ford, Pennsylvania-based Endo's shares traded up as much as 9 percent at their life-time high of $44.53 on Monday morning on Nasdaq.
"The proposed acquisition of American Medical will likely improve Endo's business risk profile through enhanced product and geographic diversity and ... a reduced dependence on patented products for revenue," Standard & Poor's credit analyst Michael Berrian said.
Endo develops and markets drugs to treat pain, bladder cancer, prostate cancer and the early onset of puberty in children. It's main revenue generators -- painkillers Lidoderm and Opana -- will both go off-patent in the next 5 years.
The company expects Lidoderm -- which currently generates about half of its revenue -- to contribute less than 30 percent of total revenue once the deal closes.
"Our device and services business will on a pro forma basis generate approximately $800 million in sales and we expect revenues in this business segment to grow in the high single digits going forward," Endo's Chief Executive Dave Holveck said on a conference call.
This is Endo's fifth acquisition since 2009. In July last year, it bought urological device maker HealthTronics for $223 million. In November, Endo bought privately held Qualitest that makes generics in areas like pain and urology, for $1.2 billion.
American Medical makes urological medical devices that help treat male problems like incontinence, erectile dysfunction and benign prostatic hyperplasia and female pelvic health issues like incontinence and pelvic floor prolapse.
American Medical was established in 1972 and Pfizer Inc bought it in 1985. E.M. Warburg Pincus & Co took control of it from Pfizer in 1998. It went public in 2000.
"We find the device business highly attractive because it brings relatively shorter, less expensive, product development cycles, more favorable pricing and reimbursement flexibility, and a higher degree of cash flow sustainability," CEO Holveck, a
Johnson & Johnson veteran who headed its venture capital unit, said.
However, Lazard Capital Markets analyst William Tanner says Endo will see lesser cost synergies from the deal than it would have had it acquired another drugmaker.
Endo expects cost synergies of at least $50 million by 2013.
"On one end (the deal) makes some sense and on the other hand the question we have is, are they getting too diversified?" Tanner said.
American Medical shareholders will get $30 apiece in cash, a 34 percent premium to the stock's closing price on Friday.
Including assumption of $312 million of American Medical's debt, the deal is worth $2.9 billion, the companies said.
On a pro-forma basis, the combined company, with 4,000 workers, will have 2011 revenue of about $3 billion.
The deal is expected to immediately add to Endo's adjusted earnings in 2011 and to boost 2012 adjusted earnings per share by 60 cents, growing to about 80 cents in 2013.
Morgan Stanley and BofA Merrill Lynch have given fully committed financing for the deal, expected to close in the third quarter, Endo said.
Endo Pharma's shares, which have risen 18 percent since Valeant made an unsolicited bid for Cephalon -- another company facing a patent cliff -- on March 29, were up 5 percent at $42.66 on Monday on Nasdaq.
Minnetonka, Minnesota-based American Medical shares were trading at $29.46 on Monday.
(Reporting by Shravya Jain, additional reporting by Krishnakali Sengupta; Editing by Gopakumar Warrier)
LONDON The head of French carmaker PSA played down the threat to British factories when he discussed the potential takeover of GM's European operations with union officials and politicians in London on Friday.
TOKYO/TAIPEI Japan's Softbank Group and Taiwan's Foxconn will soon begin operating a joint venture that deepens ties between two of Asia's biggest technology companies, they said on Friday.