Actavis Plc to acquire Forest Laboratories Inc. in a 25-billion-dollar deal

According to a person with knowledge of the matter, Actavis Plc, which is currently considered as the second largest generic-drug manufacturer by market value in the world, is close to acquiring Forest Laboratories Inc. in a deal estimated to 25 billion dollars.

The person familiar with the deal, who asked not to be named because the negotiations are not public, revealed that the purchase could be announced as early as today U.S. time. The market value of Forest Laboratories Inc. is estimated to 19.3 billion dollars.

According to data compiled by Bloomberg, Actavis Plc was the most active pharmaceutical companies buyer in the past three years. Its acquisitions amounted to 14.4 billion dollars.

Ori Hershkovitz, who is a partner at Sphera Funds Management Ltd., said that the company relies mainly on mergers and purchases in order to maintain its earning growth, especially considering the fact that new drugs research and development is quite an expensive process.

“They have promised the market that they would do a large amount of deals to keep the accretion alive,” Hershkovitz said for Bloomberg. “If you can’t do a large amount of R&D, there’s only one way to grow and that’s through M&A.”

According to data compiled by Bloomberg, the purchase of Forest Laboratories Inc. would prove out to be beneficial for the investor Carl Icahn, who became a board member of Forest in 2012 and currently is the second-largest shareholder of the company.

A person with knowledge of the negotiations shared that the current Chief Executive Officer Brent Saunders is expected to head the combined company if the deal is successfully finalized. Saunders, who is also a former Chief Executive Officer of Bausch & Lomb Inc., took the CEO position of Forest Laboratories in September 2013. Last month the company announced that an agreement with Aptalis Pharma Inc. was reached. The deal was estimated to 2.9 billion dollars and was important for Forest in order to help it add treatments for gastrointestinal ailments and cystic fibrosis in its portfolio.

Actavis Plc rose by 0.13% on Friday to settle the session at $191.88, marking a one-year change of +121.85%. According to CNN Money, the 17 analysts offering 12-month price forecasts for Actavis PLC have a median target of $210.00, with a high estimate of $230.00 and a low estimate of $179.00. The median estimate represents a +9.44% increase from the last price close.