Actavis targets Pliva in $1.6bn bid

By Gregory Roumeliotis

- Last updated on GMT

Related tags Generic drug

As a fever of consolidation continues to sweep the generics market,
Iceland's Actavis Group has offered to buy out Croatian rival Pliva
in a proposal which values it at $1.6bn (€1.31bn) and aims to
create the world's third largest generic pharmaceuticals company.

Pliva's management however gave the deal the cold shoulder on Friday, claiming the offer of $94.31 per share represents a premium of less than 12 per cent over its closing share price the day before, though Actavis insists it contains a 35 per cent premium over the average Pliva share price during the last three months.

"We have been through a massive restructuring period and now expect a lot of growth in 2007 and beyond, therefore we don't feel this proposal reflects the company's status and potential,"​ Pliva spokeswoman Marija Mandic told​.

"Following the announcement of our annual results, we have come back from a roadshow where we got a lot of positive feedback from investors, so now the key is delivering on our commitments for the future."

The company swung from $127.5m net profit in 2004 to a net loss of $75.1m in 2005 as it struggled to shed its proprietary business and cope with lost royalties.

This year doesn't look to be any better, with Pliva predicting earnings before interest, taxes, depreciation and amortisation (EBITDA) to be around $180m, less than the $190.9m it was in 2005.

Actavis, on the other hand, is growing from strength to strength, posting a net profit for 2005 of $98.5m, up 26 per cent, while successfully raising over $2.43bn of financing during the year to support $1.21bn of acquisitions and to consolidate its debt.

The firm, already one of the five leading generics companies in the world with 10,000 employees in 32 countries, has made seven acquisitions in the last year, including the generic drug business of Alpharma and Amide Pharmaceutical in the US.

This shopping spree reflects the wider trend in the generics market, with acquisitions such as those of Hexal and Eon Labs by Novartis for $8bn and of Ivax by Teva Pharmaceuticals for $7.4bn making 2005 a record year for such deal-breaking.

Driving this surge in consolidation is a demand to scale up as health insurers and governments are looking to cut costs and therefore find it cheaper to deal with single providers of pharmaceuticals who can offer a broad portfolio of products.

Acquiring Pliva would make Actavis the third largest drug maker behind Sandoz and Teva, but ahead of Merck, which is trying to take over German pharma firm Schering.

"We have already built a strong position in the US, where we expect one third of our revenues to generate in, and are solidifying our position in key generics markets such as the UK and the Netherlands, so we would like to use the Pliva brand to expand to Eastern European markets to complement our presence in countries such as Serbia and Bulgaria,"​ Actavis spokesman Halldor Kristmannsson explained to​.

"If Pliva rejects the deal then life goes on, but we feel that it would take a big risk if it goes against the current trend and does not consolidate."

Whether Actavis can go hostile on Pliva is questionable; both the company's biggest shareholder, the Croatian Pension Fund, with its 15 per cent stake, and the European Bank for Reconstruction and Development, which owns a 5 per cent stake, are unlikely to sell out according to market analysts.

Nevertheless, although Czech drugmaker Zentiva, which is also looking to expand its eastern European sales through acquisitions, isn't interested in Pliva, the Croatian drug maker will no doubt be pleased with the interest Actavis's offer has sparked in its value and prospects.

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