Iceland’s Actavis has pulled out of the race to buy the generics unit of Merck KGaA, saying that the price needed to acquire the firm has risen too high.

Actavis issued a statement saying that it has “performed extensive due diligence” on the German drugmaker’s generics division and had identified “significant potential synergies” with its own operations. However, its board now considers that “at the price levels that Actavis understands are being offered for the division by other bidders, the transaction would not produce value” for its shareholders and “therefore to proceed to the next stage of the bidding process would not be in their best interests”.

The Icelandic firm’s statement came after it was rumoured that it had been pushed out of the bidding war because it could not meet conditions set by Merck but Actavis stressed that cash was not the problem. The gap between what it was willing to pay and what Merck is looking for is thought to have been a difference of just a few hundred million euros and the company insisted that it is “very well supported by its relationship banks and has the financial capability to undertake major acquisition opportunities such as the generics division of Merck KGaA as well as other targets.”

Actavis concluded by saying that it will continue to evaluate other acquisition opportunities “to ensure the business remains at the forefront of a rapidly consolidating industry.” Actavis has been buying smaller generic drugmakers at quite a rate of knots in recent years but the really big deal seems to be eluding the group at the moment. Last year it lost out to Barr Pharmaceuticals in a battle for Croatian drugmaker Pliva.

Back to the Merck bidding war and while none of the potential participants are willing to show their hand, it appears that the remaining candidates are Israel’s Teva, Mylan Labs of the USA and joint private equity offer from Apax Partners and Bain Capital. It is thought that another round of bidding will be necessary to decide who the victor will be.