While M&A activity has been mostly lackluster, this has not been the case in the pharma industry. The major players are trying to reposition themselves for changes in regulations, as well as patent expirations of mega drugs.
So, today we got another deal: Watson Pharmaceuticals (NYSE: WPI) agreed to purchase Arrow Group for $1.75 billion. The transaction will be paid in cash and stock.
What's the rationale? Basically, Arrow has a global platform, which is certainly an important growth driver for Watson. There are operations in more than 20 countries.
Besides, Arrow has a nice assortment of generic drugs (more than 100). And, the pipeline looks strong, with more than 40 drugs.
Something else: Arrow has a 36% stake in Eden Biodesign, which is a biotech operation. This could be a attractive source of new product offerings, which would likely have high margins.
Taken together, Watson will certainly be a powerhouse, with $3 billion in combined revenues. Also, the transaction is expected to add to earnings for next year.
So far, Wall Street likes the deal. In today's trading, the shares of Watson are up 4.7% to $30.20.
Tom Taulli is the author of various books, including The Complete M&A Handbook
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