Warner Chilcott, a specialty drug maker, recently announced plans to acquire Procter & Gamble Co.’s (PG) prescription drug business for about $3 billion.
Last December, P&G had announced its intention to restrict making new investments in the pharmaceutical division and divest its interest in the healthcare brands. It decided to focus more on over-the-counter products such as Pepto Bismol, Prilosec, Vicks cough medicines and other personal care brands. Management stated that the pressure from generics was also one of the reasons for it to consider divestiture of this business.
Earlier in fiscal 2008, P&G sold its Folgers coffee business to J.M. Smucker Inc. (SJM) and added beauty and grooming businesses to its portfolio. The company’s prescription drugs division comprises products such as Actonel for osteoporosis (which generates more than $1 billion in revenue) and Enablex for the treatment of overactive bladder.
Warner Chilcott, which makes birth control, female hormone therapies and dermatological products, believes this acquisition will be a strategic fit to its existing business. The deal is expected to expand its market share in the women’s health market. Warner Chilcott will run the newly acquired business as its 100% subsidiary.
Private equity firm Cerberus Capital Management and drug maker Forest Laboratories (FRX) had also shown their interest in purchasing P&G’s prescription drug business.
Six banks, including Bank of America Corp. (BAC), JPMorgan Chase & Co. (JPM), Credit Suisse (CS), Citigroup (C), Morgan Stanley (MS) and Barclays (BCS) are expected to provide about $4 billion in financing for the deal. Out of this, Warner Chilcott will use $3 billion for the acquisition and the remaining $1 billion for refinancing its existing debt.
The deal is the largest leveraged loan transaction so far this year, providing an indication of reviving credit markets and a positive development in the loan market, especially after the collapse of Lehman Brothers.
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Read the full analyst report on “FRX”
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