Private equity firm TPG Capital is set to sell the generic drugmaker company Par to Endo. The Dublin-based pharmacy group’s acquisition of Par will create a top-five global drugmaker in the world in terms of US sales. The deal will be worth $8.05 billion.
The US-based drugmaker currently has a portfolio of around 100 products, which includes oral solids and injectable medicine.
Private Equity Cashes Out
TPG Capital took Par private in 2012 in a deal worth around $1.9 billion. At the time, the company faced a lot of pressure from activist investors and in the end, decided to sell to the private equity firm. The $8.05 billon deal will therefore see the private equity make a hefty gain from the drugmaker.
The deal will see Endo paying $6.5 billion in cash, as well as trading 18 million of its own shares for Par. The transaction also includes the assumption of Par debt. The company currently has $2.35 billion worth of debt.
Todd Sisitsky, managing partner of TPG Capital North America, said in the official statement, “The success of Par, in part, reflects our continued focus and operational expertise in the growing healthcare industry…As part of Endo, Par will be well-positioned to drive future growth and we look forward to continuing to participate in the company’s next chapter of success.”
The deal is still subject to regulatory approval, but it is expected to close during the second half of 2015.
Endo’s Quest for an Acquisition
Endo had been looking for an acquisition in the market for a while, as it hoped to expand its market share. The company bid for Salix just two months ago, but eventually had to drop out from the bidding war with Valeant.
Endo’s president and chief executive, Rajiv De Silva, said in the official statement, “This transaction with Par builds upon our generics growth, adding a strong portfolio of high barrier-to-entry and attractive gross margin products while also creating a powerful corporate platform for future growth and strategic M&A.”
The acquisition will help add 100 approved generic drugs to the company’s portfolio. The Par deal will also provide four manufacturing plants for Endo.
Furthermore, the healthcare industry, especially the pharmacy sector, has been going through “a feverish game of brinkmanship”, according to the Financial Times. A number of big companies are looking for acquisitions and mergers, as debt is currently cheap.
One of the biggest deals took place last March, as AbbVie won the bidding war for Pharmacyclics. The deal was worth $21.5 billion, which is even more astonishing as the cancer drugmaker currently produces just a single product.
The Financial Times presented data by Thomson Reuters, which shows the first quarter of 2015 had the total value of healthcare deals reach $95.3 billion. This is a 70% increase from the same period a year earlier.
Reuters’ shared data by EvaluatePharma, a market research firm, which shows the generics industry has plenty of potential. The market is expected to grow around 6.3% each year over the next six years. Wit that in mind; it wouldn’t be a surprise if private equity firms get interested at some stage.