The rumours were right and Watson Pharmaceuticals has entered into an agreement to acquire fellow generics group Actavis for 4.25 billion euros.

Speculation began last month that a deal was in the offing and a Watson/Actavis link-up is now going to become the third largest global generics company with 2012 revenues of approximately $8 billion. Under the terms of the agreement, Actavis stakeholders could also receive "additional consideration" dependent on reaching certain 2012 performance targets. Specifically, they cold get 5.5 million shares of Watson common stock in 2013, valued at around 250 million euros.

Actavis has a commercial presence in more than 40 countries and markets more than 1,000 products globally. The firm, formerly based in Iceland and now Switzerland-headquartered following a leveraged buy-out in 2007, employs more than 10,000 employees and had 2011 revenues of $2.50 billion.

Chief executive Paul Bisaro said that "in a single, commercially compelling transaction, we more than double Watson's international access and strengthen our commercial position in key established European markets as well as exciting emerging growth markets, including central and eastern Europe and Russia". Once the transaction is completed, he added, "40% of our generic revenues will come from markets outside of the USA", up from 16% now.

Mr Bisaro went on to say that the deal will be immediately accretive and result in annual synergies of greater than $300 million within three years. His counterpart at Actavis, Claudio Albrecht, said the companies are "an ideal complementary fit" and the deal will "enhance its position among the industry leaders". Additionally, the new group "will be well placed in the fast-paced and dynamic biosimilars market," he added.