23 October 2017

Amneal agrees merger with Impax

Amneal Pharmaceuticals is acquiring Impax Laboratories in an all-stock transaction worth USD 1,600 million.  Under the terms, the buyer’s shareholders will control 75.0 per cent of the combined entity, with the remaining 25.0 per cent stake being held by the target’s owners. The boards of the two companies have approved the deal, which is expected to complete in the first half of 2018. Amneal has appointed JP Morgan as an advisor, while Impax is being assisted by Bank of America, Morgan Stanley and Sullivan & Cromwell.

According to Zephyr, the M&A database published by Bureau van Dijk, this is the tenth-largest deal featuring a target in the pharmaceutical and medicine manufacturing sector to have been announced worldwide since the beginning of this year.

In order to finance the transaction, Amneal has announced a private placing to raise USD 854 million from institutional investors, as well as private equity firms Fidelity Management & Research Company and Tarrant Capital IP.

Headquartered in Bridgewater, New Jersey, Amneal manufactures generic drugs in various dosage forms, including tablets, injectables, liquids and transdermal products. It currently has six manufacturing facilities in New York and New Jersey, with another five located in India.

Nasdaq-listed Impax develops and produces pharmaceutical products for central nervous system disorders and other illnesses through its Specialty Pharma segment, as well as generic drugs via its Generics division.

The transaction comes as smaller drug makers like Impax are facing competitive pricing due to swift approvals of generic medicines by US regulators, according to Reuters. This is exacerbated by the fact that large retail pharmacies, including Wal-Mart Stores and Walgreens Boots Alliance, now have more bargaining power, which is putting further pressure on drug prices, the news provider reported.

Impax is hoping to stay ahead of the game by merging with Amneal. According to the target’s press release, the amalgamated group will become the fifth-largest generic drug maker in the US by gross revenue following the transaction. It will also have a portfolio of more than 300 pharmaceutical products and is expected to yield adjusted earnings before interest, tax, depreciation and amortisation of up to USD 750 million in 2018 on a pro forma basis.

Commenting on the consolidation, Paul Bisaro, president and chief executive of Impax, said: “This transaction is financially compelling as we expect the combination to be accretive to Impax's standalone adjusted per share earnings in the first 12 months and generate double-digit growth in revenue and adjusted EPS [earnings per share] over the three years following the close of the transaction.” He added: “The anticipated strong cash flows from the combined company allow for the repayment of debt and the ability to meaningfully invest in our business.”

© Zephyr