Par Pharmaceutical Cos. (PRX:US), a maker of generic drugs, agreed to be acquired for $1.9 billion by TPG Capital as the private-equity firm looks to gain from efforts to curtail health-care costs.
Par stockholders will receive $50 a share in cash, the Woodcliff Lake, New Jersey-based company said in a statement today. The offer carries a 37 percent premium over Par’s closing share price (PRX:US) on July 13. Par rose to $50 at the close in New York, indicating that investors are expecting a higher bid.
Under the agreement, Par will seek a better offer through Aug. 24, the company said. The price is low compared with recent deals for generic-drug makers and Par probably will draw other bidders, said Jim Molloy, an analyst with ThinkEquity LLC in Boston. Potential buyers may include Endo Health Solutions Inc. or Mylan Inc., he said.
“I think this is an opening bid,” Molloy said in a telephone interview. “Endo or someone that is looking to expand in the generic space would be able to pay higher.”
Par shares had gained (PRX:US) 6.7 percent in the past 12 months through yesterday.
Nina Devlin, a spokeswoman for Canonsburg, Pennsylvania- based Mylan, and Kevin Wiggins, a spokesman for Chadds Ford, Pennsylvania-based Endo, both declined in an e-mail to comment on whether their companies would be making a bid for Par.
Par generated $926 million in revenue last year and has more than 50 products on the market and 30 in development. The drugmaker’s shares had gained (PRX:US) 6.7 percent in the past 12 months through yesterday.
“The company is positioned to benefit from the strong macro trends of a greater focus on cost-effective health-care solutions and the increasing demands from an aging population,” said Todd B. Sisitsky, a partner at Fort Worth, Texas-based TPG, in the statement.
Health insurers are pushing patients to switch to generic drugs, which can cost 90 percent less than brand-name equivalents. Medicines valued at $123 billion have lost patent protection since 2003, opening the door to cheaper copies.
JPMorgan Chase & Co. acted as financial adviser to Par, and Orrick, Herrington & Sutcliffe LLP acted as Par’s legal adviser. Cravath, Swaine & Moore LLP acted as independent legal counsel to Par’s Board of Directors.
Bank of America Corp., Deutsche Bank AG and Goldman Sachs Group Inc. acted as financial advisers and provided financing to TPG. Ropes & Gray LLP acted as legal adviser to TPG.
Private-equity deals in health-care products and services fell 46 percent in the past 12 months to $15.6 billion as the total value of private-equity deals fell 27 percent, according to data compiled by Bloomberg. Total deal making in the second quarter fell about 2 percent to the lowest level since 2009 as Europe struggled to contain its debt crisis, heightening concerns about the fallout on global economic growth.
Last month, bandages-supplier BSN Medical agreed to be bought by EQT Partners AB, the private-equity firm partly owned by Sweden’s Wallenberg family, for about 1.8 billion euros ($2.2 billion) in Germany’s largest buyout since before the financial crisis. In April, Terra Firma Capital Partners Ltd., the U.K. buyout firm founded by Guy Hands, said it would buy Four Seasons Health Care Group Ltd. for as much as 825 million pounds ($1.3 billion).
Private-equity firms pool money from investors to take over companies, financing the purchases mostly with debt, with the intention of selling them or taking them public within about five years for a profit.
TPG has health-care investments including Aptalis Pharma Inc., Biomet Inc. and IASIS Healthcare LLC. The firm oversees $51.5 billion of assets under management.
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