With deal, Teva drops its $40 billion proposal to acquire Mylan

JERUSALEM — Teva Pharmaceutical Industries Ltd. plans to buy Allergan’s generic drug business for about $40.5 billion and, with the deal, has withdrawn its proposal to acquire Mylan N.V. for approximately $40 billion.

Teva said Monday that Dublin, Ireland-based Allergan will receive $33.75 billion in cash and $6.75 billion in shares of Teva. The agreement has been approved by the boards of both companies and is expected to close in the first quarter of 2016.

“This transaction delivers on Teva’s strategic objectives in both generics and specialty,” Erez Vigodman, president and chief executive officer of Teva, said in a statement. “Through our acquisition of Allergan Generics, we will establish a strong foundation for long-term, sustainable growth, anchored by leading generics capabilities and a world-class late-stage pipeline that will accelerate our ability to build an exceptional portfolio of products, both in generics and specialty as well as the intersection of the two. Our respective portfolios of generic medicines and applications are highly complementary, providing Teva with high-quality growth and earnings visibility, and the scale and resources to expand upon our specialty capabilities.”

After the purchase of Allergan Generics closes, Teva is expected to have pro forma sales of about $26 billion and EBITDA of approximately $9.5 billion in 2016, including an estimated $11 billion in sales outside of the United States. Together, Teva and Allergan Generics will have a commercial presence in 100 markets, including a top-three leadership position in more than 40 markets.

Teva said the addition of Allergan Generics will give it the most advanced R&D capabilities in the generic drug industry, with about 320 combined pending ANDAs in the United States, including exclusive offerings of approximately 110 U.S. FTF pending ANDAs. Teva also noted that the scale and broader capabilities brought by the Allergan Generics acquisition will help it drive growth in its specialty pharmaceuticals business, in particular expanding its core specialty franchise in the central nervous system, pain and migraine, and respiratory segments.

“This acquisition reinforces our strategy, accelerates growth and diversifies revenues both by product and geographically, supporting our new business model,” Vigodman added. “I strongly believe that as a result of our strengthened financial profile following this transaction, we will be even better-positioned to reap the benefits of Teva’s integrated, innovative specialty and generic research to support top-line growth and expand our portfolio across the business.”

Teva announced the decision to terminate its proposal to buy Mylan immediately after unveiling the agreement with Allergan. When Teva made the $40 billion cash-and-stock proposal in April, it tried to convince Mylan to forgo its unsolicited bid to buy Perrigo Co. plc in a $29 billion deal.

“In light of our strategic acquisition of Allergan Generics, which will transform the industry, our board and management team has decided that withdrawing the proposal to acquire Mylan is in the best interests of Teva stockholders,” Vigodman stated on Monday. “Since announcing the proposal to acquire Mylan on April 21, 2015, we have appreciated the opportunity to talk with many of our investors about the future of the generics industry, and we are confident our proposed transaction with Allergan best positions Teva to succeed in today’s industry landscape.”