(Reuters) - Watson Pharmaceuticals
Inc (WPI.N) is close
to buying Swiss-based Actavis for around $7 billion, marking the latest deal
between generics companies racing to achieve economies of scale, three sources
familiar with the matter said.
The deal would involve U.S.-based Watson, already among the world's five
largest generic drugmakers, paying between 5.0 billion and 5.5 billion euros
($6.6-7.3 billion) for Actavis, a business not much smaller than its own, the
sources said.
After rapid expansion in the early 2000s, Actavis underwent a leveraged
buyout in 2007 by Icelandic tycoon Bjorgolfur Thor Bjorgolfsson, which
ultimately left Deutsche Bank (DBKGn.DE) holding
billions of euros of its debt.
It has since been seen as a target for either an eventual initial public
offering or a trade sale. Its strong presence in central and eastern Europe
fits with Watson's desire to expand in these particular emerging markets.
Spokesmen at Watson, Actavis and Deutsche Bank declined to comment on
Wednesday.
Targeting Actavis is a bold move for Watson, whose previous acquisitions
include the $1.75 billion purchase of Arrow Group in 2009, which established a
foothold for the company in Europe, and the $1.9 billion purchase of Andrx Corp
in 2006.
The purchase of Actavis would be far larger but could be made to work since
there would be scope for significant synergies, including the possible closure
of some manufacturing capacity in the United States.
The generics sector has seen a wave of M&A in recent years because
Western governments are putting pressure on the industry to provide drugs at
the lowest possible price, which favors large players who can produce at low
costs.
Watson further expanded its European presence last year when it bought Greece-based
Specifar Pharmaceuticals for $562 million.