Teva to buy Barr for $7.46 billion, boost generic lead

By Lewis Krauskopf

NEW YORK (Reuters) - Teva Pharmaceutical Industries (TEVA.O: Quote, Profile, Research, Stock Buzz) (TEVA.TA: Quote, Profile, Research, Stock Buzz), the world's largest generic drug company, said on Friday it would buy rival Barr Pharmaceuticals Inc (BRL.N: Quote, Profile, Research, Stock Buzz) for $7.46 billion to expand its leadership in the U.S. market and fortify its presence in Europe.

The deal, which began taking shape in talks outside a Florida hamburger restaurant, is the latest in a wave of consolidation in the generic-drug sector that some analysts suspect will result in a handful of major global players.

Teva would gain a prominent women's health franchise, including Barr's major portfolio in generic oral contraceptives. Barr also sells the brand-name contraceptive Seasonique, and the Plan B emergency contraceptive.

"Businesswise, the acquisition makes tons of sense for Teva," said Yoav Burgan, pharmaceuticals analyst at Leader Capital Markets in Tel Aviv, adding that cost savings should be "very substantial."

Israel-based Teva, the world's largest generic drug company, plans to buy New Jersey-based Barr for $66.50 per share in cash and stock, making it the largest deal ever by an Israeli company.

The price represents a 42 percent premium to Barr's closing price on Wednesday. Barr shares rose 22 percent on Thursday on reports of a Teva acquisition, and an additional 11 percent to $63.43 on Friday.

Morningstar analyst Brian Laegeler said Barr was trading below the offer price since the deal may take some time to close and there was a small antitrust risk. Teva shares rose 4.4 percent to $42.87.

UBS analyst Ricky Goldwasser said the deal value looked in line with other acquisitions in the area.

"Barr's stock rose so much on the leaks that the premium looks smaller than it really is. On an historical basis, they aren't paying a rich premium, but it's still in line with industry metrics," said one arbitrageur who declined be named.

The arbitrageur, who specializes in takeover stocks, said a rival bid was highly unlikely. Other possible suitors mentioned have been Novartis AG's (NOVN.VX: Quote, Profile, Research, Stock Buzz) Sandoz generics unit, or a large pharmaceutical company.

BOOSTING U.S. PRESENCE

Teva had approached Barr three times over the past seven years about an acquisition, company executives said, while Barr Chief Executive Bruce Downey said this was the 12th attempt overall for an acquisition of his company during his 16 years at Barr.

Talks for this deal started at an industry conference in Palm Beach, Florida, in April, when Downey and Teva Chief Executive Shlomo Yanai waited to be seated for lunch on a park bench outside a hamburger restaurant.

"We declared then if it ever came to fruition, we'd buy the park bench," Downey joked on a conference call with analysts. "I think that's going to be a negative synergy for Teva as they have to spend the money to acquire that piece of furniture."

The combined company would be a generic powerhouse employing about 37,000 people globally and operating directly in more than 60 countries. Together, Barr and Teva had revenue of about $11.9 billion in 2007.  Continued...