Iceland’s Actavis yesterday upped the ante in its battle with US firm Barr Laboratories to walk down the aisle with Croatian firm Pliva, raising its bid to 795 kuna ($139) per share and knocking Barr’s latest 743 kuna per share offer into touch. But it’s unlikely that this is the end of it and analysts are broadly expecting the US generics powerhouse to re-enter the fray with an even better offer.
The latest sum to be slapped on the table is 10% better than Actavis’ last offer and values Pliva at $2.5 billion. The Icelandic firm said it already owns almost 21% of the Croatian firm’s share capital, and points out that shareholders will receive 795 kuna in cash per share plus a 12 kuna per share dividend. But the bid is conditional on Actavis receiving acceptances of more than 50% of Pliva's outstanding issued share capital.
And Actavis has laid out its reasons why Pliva’s shareholders should choose it as a marriage partner, claiming it will bring more to the local economy with the creation of new jobs as well as greater investment in the existing R&D and production facilities. It also says it will keep Pliva’s principal operations in Zagreb and will seek a stock listing there; whereas Barr has never operated outside of North America, in contrast it says it has a strong track record in Central and Eastern Europe. And, with its infrastructure in Western and Eastern Europe, it says in regions where Pliva is currently underserved it will be able to build critical mass that will help combat the volatile pricing environment of the European generic pharmaceutical market.
Actavis says the combination of the two businesses can generate synergies of at least 50 million euros in 2007, 100 million euros in 2008 and the same amount each year thereafter. The impact of the increased offer is expected to be neutral in 2007, positive in 2008 and strongly accretive from 2009 onwards, with earnings before interest tax, depreciation and amortisation (EBITDA) margins forecast to improve from 21%-22% of revenue to 23% in the first full year of 2007.
But don’t expect the saga to end just yet. Barr has already said it is evaluating the competing bid and will respond no later than September 8. Pliva has previously made Barr its preferred bidder as it would give it a presence on both sides of the Atlantic.