Teva Pharma (TEVA) Nears Deal to Acquire Allergan's (AGN) Generic-Drug Business

Israel-based drug maker Teva Pharma (NYSE: TEVA) is in talks to acquire Allergan's (NYSE: AGN) generic-drug business, the Wall Street Journal reported on Saturday. The deal is said to be valued at about $45 billion and could be announced as soon as Monday.

If a deal is reached between Teva and Allergan it would likely mean Teva would drop its unsolicited bid for Mylan (NASDAQ: MYL). Mylan has been resisting Teva's overtures as it pursues its own acquisition of Perrigo (NYSE: PRGO).

The deal for Allergan's generic unit would give Teva scale and cost savings in the highly competitive generic-drug market - something it was trying to achieve with the Mylan deal.

Leerink Partners analyst Jason Gerberry said divesting the generic business makes sense for Allergan as it is of little to no strategic value in having both generic and branded products. Also, with peak multiples being paid for generic assets they see it as a clear mechanism for the company to unlock value and get a higher multiple on its stronger growing branded drug business. Gerberry sees Shire (NASDAQ: SHGP) as the closest comparable to a new Allergan and expects it to trade on a 17-18x multiple of 2016E EBIT, or about $365-390/share.

For Teva, the deal makes sense given increasing payer consolidation and a near-term impact from Copaxone generics, Gerberry said. The deal brings Teva near-term EPS growth, increased pricing power and bolsters its first-to-file generic pipeline, the analyst said.

You May Also Be Interested In

• IBM (IBM) to Acquire HashiCorp (HCP) for $35/sh Cash or $6.4B
• Dave & Buster's Entertainment (PLAY) Appoints Darin Harper as CFO
• Bunge (BG) PT Raised to $122 at Citi