In the April 2006
issue:
March Merger Mania in Pharma - Europe Sees A Flurry of Springtime
Dealmaking In The Pharmaceutical Industry, As Bayer Leads The Pack With A
$19.5 Billion Bid for Schering AG
The European pharmaceutical market sees strong consolidation in 2006, led
by Bayer's $19.5 billion acquisition of Schering.
...
First Quarter Results
A total of 221 mergers and acquisitions were announced in the health care
industry during the first quarter of 2006. Approximately $39.3 billion was
committed to fund this M&A activity.
...
March M&A Activity
A total of 73 transactions were posted during March. Approximately $26.3
billion was committed to fund them.
...
In The Departments
Services
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Health Care Services
-
Deal Summaries
-
Additional Transactions
-
Transaction Updates
Technology
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Health Care Technology
-
Deal Summaries
Additional Transactions
-
Transaction Updates
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Articles Archive
Companies Mentioned in this issue:
April 2006
A
Accipiter Capital Management p3
Actavis Group, hf p11
Advest International p10
Allen SpA p10
Allion p9
American Retirement Corporation p4
Andrx Corporation p16
Apotex p16
Athena Diagnostics p11
AusAm Technologies p11
B
Baptist Memorial Hospital Forrest City p3
Bayer AG p1
Behrman Capital p11
Berna Biotech p15
BioScrip p9
Brandywine Senior Care p4
Bridgewell p16
Bristol-Myers Squibb p16
C
C.R. Bard p15
Capital Senior Living p8
Cardium Therapeutics p16
Carlisle Regional Medical Center p2
Celtic Healthcare p2
Chartwell p2
Christus Health p3
Christus St. Joseph Hospital p3
Citigroup p10
CLONDIAG chip technologies GmbH p15
Colgate-Palmolive p16
Coloplast A/S p15
Community Health Systems p3
Credit Suisse p10
Crucell N.V. p15
Cypress Surgery Center p9
D
Dynavax Technologies Corp. p15
E
Esoterix p15
Ethimed p10
F
Fisher Scientific International p11
Freedom Village of Bradenton p4
G
GlaxoSmithKline p10
GMAC Commercial Mortgage Bank p4
Good Samaritan Community Healthcare p4
Groupe CS Dermatologie p16
Gulf States Health Services p3
H
H.C. Starck p10
H.S. Maiman p9
HCA p3
Hearthstone Assisted Living p4
HFG Healthco-4, LLC p9
Highland Medical Center p3
Hospital Partners of America p3
Humana p9
I
Idenix Pharmaceuticals p16
InnerCool Therapies p16
Intravenous Therapy Services p9
Inverness Medical p15
IVAX Corp. p10
K
Keryx Biopharmaceuticals p11
L
LHC Group p3
LifePoint Hospitals p3
LINCO p11
M
Medical Mutual of Ohio p9
MedTech, S.A. p16
Mentor Corp. p15
Merck & Co. p11
Merrill Lynch International p10
MultiCare Health Systems p4
N
Nanogen p11
Nationwide Health Properties p4
Neuromed Pharmaceuticals p16
NicOX, S.A. p11
Novartis p11
O
OptiCare Health Systems p15
Option Care p2
P
Palisade Concentrated Equity Partnership, L.P. p15
Pfizer p10
Piper Jaffray p16
PLIVA Pharmaceuticals d.d. p11
Prudential Real Estate Investors p4
Q
Quest Diagnostics p15
R
Ranbaxy Laboratories, Ltd. p10
Reckitt Benckiser p16
Refac Optical Group p15
Retirement Residence REIT p4
Rhein Biotech GmbH p15
Royal Philips Electronics p15
S
sanofi-aventis p10
Schering AG p1
Serologicals Corp. p11
Shiloh Health Services p3
Sinclair Pharma p16
Sindan p11
Sky Trust p3
Specialty Laboratories p15
Summit Insurance Company p8
Sumner Regional Health Systems p3
Surgical Ventures p9
Symbion p9
T
Terapia, S.A. p10
Teva Pharmaceutical Industries p10
The Covenant Group p8
Tri-Isthmus Group p9
Trinity Health p9
Trinity Health Care p2
Trinity Health Plans p9
Tutogen Medical p16
U
U.S. Vision p15
UnitedHealth Group p9
V
Venetec International p15
W
Warburg Pincus p4
Watson Pharmaceuticals p16
Whittier Goodrich Pharmacy p9
Witt Biomedical p15
Wolff Walsrode p10
Z
Zentiva p10
Zimmer Holdings p16 |
March Merger Mania in Pharma - Europe Sees A
Flurry of Springtime Dealmaking In The Pharmaceutical Industry, As Bayer
Leads The Pack With A $19.5 Billion Bid for Schering AG
Email Editor
March saw a surge of M&A activity in the
pharmaceutical sector, particularly in Europe.
A total of 17 deals were posted during the month, with a combined
price tag of $23.9 billion, based on revealed prices.
Nine of the month’s deals involved
European-based pharma companies, acquired with $20.9 billion, primarily in
Central Europe. The remaining $2 billion was spent on seven deals in North
America and one in Japan. In nine of the transactions, the acquirer was a
foreign-based concern, with six headquartered in Europe and three in
India.
Bayer’s Big Buy
One deal captured the lion’s share of
this action. Germany’s Bayer AG (NYSE: BAY) made an offer of €86
($103.67) per share to buy Schering AG (NYSE: SHR), a
research-based pharmaceutical company. Valued at $19.5 billion, this
single transaction accounts for 82% of the dollars spent in the pharma M&A
market.
Bayer is a diversified chemical and
pharmaceutical company which, on a trailing 12-month basis, generated
revenue of $32.9 billion. Based in Berlin, Schering makes specialty
pharmaceutical products and contrast media used in imaging systems. Its
business focuses on four general areas: gynecology and andrology,
oncology, diagnostic imaging and specialized therapeutics for disabling
diseases. In its most recent financial year, Schering generated revenue of
$6.4 billion, EBITDA of $1.5 billion and net income of $707 million.
In the wake of the $8 billion merger
between Teva Pharmaceutical Industries (NASDAQ: TEVA) and IVAX
Corp., which closed in January to form the world’s largest generic
pharma company, many smaller pharma concerns, whether generic, specialty
or niche companies, were put into play, Schering among them. Merck KGaA
(DE: MRCG) liked what it saw, and made a hostile takeover bid early this
March, offering €77 per share, or $17.9 billion, which Schering’s board
rejected.
This is where Bayer stepped in as a white
knight and countered with its $19.5 billion offer, which Schering’s board
endorsed, ultimately realizing the company could no longer remain
independent. Rather than entering into a bidding war, Merck KGaA withdrew
from the field, so there is now no point in buying up stock in the hopes
that its share price will be bid up further. The deal is to be financed by
€3 billion in cash on hand and a new credit line provided by Credit
Suisse and Citigroup. To help raise some of that cash, Bayer
will spin off its H.C. Starck and Wolff Walsrode
subsidiaries, which are involved in manufacturing plastics and chemicals.
This deal, the largest Bayer has
undertaken in its 142-year history, offers Schering shareholders a 29%
premium over the stock’s price before Merck KGaA’s hostile bid. The price
to revenue multiple is 3x; the price to EBITDA multiple, 13x. The
combination of the two companies, to be called Bayer Schering Pharma and
based in Berlin, will result in a firm with strengths in anti-infectives,
cancer drugs, treatments for MS and contraceptives.
Bayer, which had been wavering between
Schering’s specialty pharma and Pfizer’s (NYSE: PFE) consumer
health care business (see p. 16), valued at about $14 billion, has decided
to throw its lot in with the higher-margin specialty business. Bayer
anticipates that as a result of this deal, SHR’s EBITDA margin will grow
from its current 19% to 25% by 2009 and contribute to growing the
long-term EBITDA margin for Bayer Group as a whole.
Central Europe Consolidates
Apart from this mega-deal, the
Pharmaceutical industry saw other, concerted M&A activity in Central and
Eastern Europe during March. sanofi-aventis (NYSE: SNY) is
acquiring a 24.9% stake in Zentiva (PR: ZNTVsp), a generic pharma
company based in the Czech Republic and serving Eastern Europe. It is
paying Warburg Pincus and some members of Zentiva management $515 million
for this share. As a result of this deal, SNY becomes Zentiva’s largest
shareholder, and its resources will enable further penetration into the
central European market. This transaction implies a purchase price of
$2.06 billion for a 100% interest in the company, and an adjusted price to
revenue multiple of 4.2x.
India’s Ranbaxy Laboratories, Ltd.
(BSE: RANB) made three deals in Europe during March. Further down the
Danube, it is acquiring a 96.7% interest in Terapia, S.A., the
largest independent generic pharma company in Romania, from Advest
International for $324 million. The raw price to revenue multiple is
about 4x while the price to EBITDA multiple is 11.6x. This deal adds to
the buyer’s existing operations in Romania, which is scheduled to join the
European Union in 2007. Seller Advest was advised by Merrill Lynch
International.
Ranbaxy’s two other deals did not come
with prices, but further the company’s expansion in Europe. From
GlaxoSmithKline (NYSE: GSK), it is buying Allen SpA, GSK’s
Italian generic business. It is also acquiring Ethimed, one of
Belgium’s top 10 generic pharma companies. Ethimed has a portfolio of
approximately 20 drugs, and serves the Benelux region. All three Ranbaxy
deals are being funded with $400 million the company raised earlier in the
year from an overseas bond issue. The company currently derives
three-quarters of its revenue overseas, and while in the past it has
focused on the U.S. market, it is now putting more of its eggs in the
European basket.
Romania was also the destination for
another generic company this month. Iceland’s Actavis Group, hf (ISE:
ACT) is paying $177.5 million to buy Bucharest-based Sindan, a
generic pharma company focused on oncology which currently has 31 products
and a development pipeline with 10 product candidates. The raw price to
revenue multiple is nearly 2.2x while the price to EBITDA multiple is
8.9x. However, Sindan comes with €14 million in cash on hand, which
effectively lowers the purchase price to $160.3 million, and the relevant
acquisition multiples to 1.95x and 8.0x, respectively. With a presence in
six foreign markets, the Sindan acquisition extends Actavis’ reach into
Central and Eastern Europe.
And, no doubt about it, Actavis has its
eyes on other game in Central Europe. During mid-March, it launched a
preliminary $1.6 billion bid for Croatia’s generic drug maker PLIVA
Pharmaceuticals d.d. (LSE: PLVD). The offer values PLVD at $93.41 per
share, or a 35% premium to the average share price over the past three
months. This bid, however, is worth just 1.3x 2005 revenue. PLVD
management has rejected the offer, believing that it does not reflect the
company’s true value, and that ACT may be taking advantage of PLVD’s
recent results which were somewhat depressed by corporate restructuring
activities and charges. PLVD is among the world’s top 12 generic pharma
companies while ACT is among the top five; a merger of these two would
create a company in the number three spot after Teva and Novartis
(NYSE: NVS).
In one other notable European deal this
month, Merck & Co. (NYSE: MRK) is acquiring exclusive worldwide
rights to a nitric oxide-based technology, which promises to be crucial in
developing new antihypertensive drugs, from France’s NicOX, S.A.
(PR: COX). Merck will pay as much as $351.4 million, consisting of an
$11.2 million upfront payment and up to $340.2 million in milestone
payments. The agreement also contemplates royalties on all products
arising from the new technology.
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