Actavis Said to Weigh Breakup as Bidding Moves to Second Round
Bidding is entering the second round after several proposals were submitted last week, said one of the people, who declined to be identified because the information isnt public. Offers include cash and stock, this person said. Actavis may consider selling its U.S. operations separately, the person said.
Actavis, which hired Merrill Lynch & Co. last year to handle the sale, originally anticipated bids as high as 6 billion euros ($7.5 billion) for the whole company. A price of 4 billion euros to 4.5 billion euros may more accurately reflect Actaviss growth prospects after setbacks in the U.S., said other people close to the sale. Watson Pharmaceuticals Inc. of the U.S. and Frances Sanofi-Aventis SA may be interested in bidding, analysts said.
“In the current market situation, they can take their time,” Leslie Iltgen, an analyst for Bankhaus Lampe KG in Dusseldorf, Germany, said of potential bidders. “Prices are coming down, rather than going up.”
The credit crisis is making financing scarcer, prompting some bidders to offer stock, one of the people said.
Reykjavik-based Actavis, a maker of generic medicines, began seeking buyers in January, almost two years after entrepreneur Bjorgolfur Thor Bjorgolfsson took the company private. Actavis needs to raise at least 5 billion euros, owed mostly to Deutsche Bank AG to repay funds Bjorgolfsson borrowed to acquire the company, the people said.
Bjorgolfssons Deals
Hjordis Arnadottir, an Actavis spokeswoman, declined to comment on the sale.
Bjorgolfsson spent more than $1.8 billion on takeovers to build Actavis into the worlds seventh-biggest maker of generic drugs based on 2007 sales. The company had pro forma earnings before interest, tax, depreciation and amortization of about 450 million euros last year and predicts that will rise to 600 million euros this year, two of the people said.
Actavis was sued last year by regulators in the U.S., where the company operates seven factories, after Food and Drug Administration inspectors found deficiencies in manufacturing. The generic-drug maker entered an agreement in December aimed at resuming production at two manufacturing plants and a packaging facility in Totowa, New Jersey.
Locked Out
Private-equity firms werent invited to participate in the auction, the people said. Buyout firms have struggled to finance acquisitions after banks and investors cut off the debt financing that had fueled a two-year buyout boom. Leveraged buyouts fell 69 percent to about $203.8 billion in 2008, Bloomberg data show.
Watson, which ranked 6th last year in the $75 billion market for generic drugs, may seek an acquisition after larger rival Mylan Laboratories Inc. moved up to third-largest with the 2007 purchase of Merck KGaAs generics unit, the people said. A possible Watson bid for Actavis or Germanys Ratiopharm GmbH, another generic-drug company up for sale, is “something to watch for in the coming months,” Corey Davis, an analyst at Natixis Bleichroeder, wrote in a report Jan. 30.
Watson may be able to raise as much as $3 billion to finance a deal that would provide access to overseas markets and new technology, though the company may not want to spend that much, Chief Executive Officer Paul Bisaro said in an interview last week. Patty Eisenhaur, a spokeswoman for the Corona, California- based drugmaker, declined to comment on Actavis.
Sanofi may want to boost the size of its “subscale” generics business by buying Actavis or Ratiopharm, James Millett, an analyst at JPMorgan Cazenove Ltd. in London, wrote in a Feb. 18 report. Jean-Marc Podvin, a spokesman for Paris-based Sanofi, declined to comment on Actavis.
Teva Pharmaceuticals Ltd., the worlds largest generic-drug maker, isnt interested right now in buying Actavis or Ratiopharm, Chief Financial Officer Eyal Desheh said on Feb. 17. Teva, based in Petah Tikva, Israel, is busy digesting last years takeover of Barr Pharmaceuticals Inc.