Endo Pharmaceuticals' shares were on the rise yesterday as investors revelled in news of its purchase of Paladin Labs and a healthy set of financial results, fuelling a near 30% surge in its stock price.
The group said it has reached a definitive agreement to acquire the Canadian specialty pharma in a stock and cash transaction valued at around $1.6 billion.
The transaction, at $77.00 (CAD) per share, represents a 20% premium to Paladin's stock price of $63.91 as of November 4, and is expected to be immediately accretive to Endo's 2014 adjusted earnings per share, the firm said.
When the deal has closed, both companies will be acquired by a newly formed Irish holding company "New Endo", which will be led by Endo's current management team.
Paladin will be a separate operating company under New Endo, with its current management team, Montreal-based headquarters and name (in Canada) remaining unchanged.
Upon closing, current Endo shareholders will own around 77.5% of the New Endo, while current Paladin shareholders will own about 22.5% of the New Endo.
Rajiv De Silva, Endo's president and chief executive, noted that the move "accelerates Endo's transformation from an integrated health solutions company to a top tier global specialty healthcare leader".
Paladin has "a proven track record of acquiring and in-licensing innovative new products, and developing international growth platforms," he said, added to which its "stable and growing cash flows and strong Canadian franchise complement our existing portfolio and further diversify our pharmaceutical product mix and geographic reach".
On the other hand, the deal offers Paladin shareholders "an attractive current premium for their shares while allowing for ongoing participation in the upside potential of the combined company," added Jonathan Ross Goodman, its chairman and founder.
Meanwhile Endo also pleased investors by beating expectations for its third-quarter revenues, posting $715 million, dropping 5% from the same period last year but coming in $19 million above analysts' consensus forecast (as reported by Investors Business Daily).
Excluding special items, profit inched up 5% to $1.34 a share.