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Watson Pharma rises on reports of $7B Actavis deal

Watson Pharma rises on reports of $7B Actavis deal

March 22nd, 2012 in News

NEW YORK (AP) - Shares of Watson Pharmaceuticals Inc. jumped Wednesday on reports the generic drugmaker is in talks to buy European counterpart Actavis for about $7 billion.

Watson stock rose $5.16, or 8.8 percent, to $63.69 Wednesday and gained as much as 10.1 percent earlier in the session.

Citing unidentified sources, Reuters said the Parsippany, N.J., company could pay $6.6 billion to $7.3 billion for Actavis, which is privately held. Watson and Actavis both declined to comment on the reports.

Actavis is headquartered in Zug, Switzerland. Icelandic businessman Bjorgolfur Thor Bjorgolfsson owns a 78-percent stake in the company, which was taken private in 2007. Actavis has around 10,000 employees to Watson's 6,700.

Watson reported $4.58 billion in revenue in 2011, up 29 percent from the previous year, on sales of generic versions of drugs like the cholesterol fighter Lipitor, pain drug Kadian, and attention deficit hyperactivity disorder treatment Concerta. It also expanded its business by buying generics maker Specifar Pharmaceuticals of Greece in May. That deal was valued at $563.1 million.

Watson also makes brand-name products like the enlarged prostate drug Rapaflo. The company expects $5.4 billion in revenue in 2012.

In a note to clients, Cowen and Co. analyst Ken Cacciatore said it is difficult to get a handle on Actavis' results because it is privately held, but he said the company may be on pace for revenue of $2.9 billion to $3.05 billion in 2013, and it could add 70 cents per share to Watson's annual profit. Cacciatore wrote that about 70 percent of Actavis' revenue comes from international markets where Watson does not do much business.

However he said the deal does not create much value for Watson, based on his estimates. He rates Watson shares "Neutral."