Watson Pharmaceuticals, Inc.
) recently received the green signal from the European Commission
(EC) for its proposed acquisition of privately-held generic pharma
company Actavis. The EC said that although the acquisition will
lead to major changes in the competitive scenario, the combined
entity will, nevertheless, continue facing strong competition.
The EC focused on the impact of the acquisition on the markets
for drugs like anti-depressants and anti-hypertensives, especially
in Denmark, Sweden and the UK.
Watson Pharma had first announced its intention to acquire
Actavis in April 2012 for an upfront payment of €4.25 billion.
Actavis stakeholders could also receive an additional consideration
depending on the achievement of certain 2012 performance targets.
The achievement of these targets would result in the delivery of up
to 5.5 million shares of Watson Pharma in 2013. Actavis has a
presence in more than 40 countries.
The deal is scheduled to close in the fourth quarter of 2012.
Approval from the Federal Trade Commission (FTC) in the US is yet
We view the upcoming acquisition of Actavis as a smart strategic
move by Watson Pharma. This deal, which is expected to be
immediately accretive, should help the company strengthen its
presence in the ex-US generics market and expand and strengthen its
presence and product portfolio. The acquisition will more than
double the company's commercial position in key European markets as
well as emerging markets, including Central and Eastern Europe and
We note that this acquisition will make Watson Pharma the third
largest global generics company. Other players in the generics
Dr. Reddy's Laboratories
). We currently have a Neutral recommendation on Watson Pharma,
which carries a Zacks #3 Rank (short-term 'Hold' rating).
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