Warner Chilcott strikes a healthy deal for P&G unit

Posted Aug 24th 2009 1:00PM by Tom Taulli
Filed under: Deals, Procter and Gamble (PG)

The dealmaking continues apace in the drug sector. Today, Warner Chilcott plc (NASDAQ: WCRX) agreed to shell out $3.1 billion for the global pharma business of Procter & Gamble (NYSE: PG). The deal is all-cash.

There are several megatrends driving the pharma deals. First, it's getting tougher to produce new drugs. And unfortunately, many pharma companies are running out on the patent protection of key money-makers. At the same time, President Obama is intent on getting some type of reform in health care.

To deal with this, pharma companies are trying to bulk up and expand into new categories (even animal drugs). And, this is certainly the case with the deal for the P&G unit. It has an extensive global footprint and has strong offerings in areas like women's health. Interestingly enough, there are plans to launch an erectile dysfunction treatment.

The financials are also healthy. The P&G unit generates $2.3 billion in sales and $800 million in operating earnings.

Also, Warner Chilcott was able to get a $4 billion leveraged loan. No doubt, this is a big deal as it is a sign that Wall Street is warming up to providing credit on transactions.

All in all, investors like the deal. In today's trading, the shares of Warner Chilcott are up 25% to $20.10.

Tom Taulli is the author of various books, including The IPO Primer and The Complete M&A Handbook.

Tags: drugs, health care, inthenews, PG, Procter and Gamble, Warner Chilcott, WarnerChilcott, WCRX