Endo buys Par Pharma for $8B to expand generics

Endo International (ENDP) said Monday it has agreed to pay $8.05 billion to private equity firm TPG to buy Par Pharmaceutical Holdings, a deal to expand its growing generics business.

The stock-and-cash deal, approved by the boards of both companies, will create one of "the top five" generic-drug manufacturers in terms of U.S. sales, Endo said. It's expected to close in the second half of this year.

Endo will pay $6.5 billion in cash and 18 million Endo shares, which are worth about $1.55 billion as of May 15. The price includes assuming Par's debt.

"This transaction with Par builds upon our generics growth, adding a strong portfolio of high barrier-to-entry and attractive gross margin products," said Endo CEO Rajiv De Silva in a statement.

In 2012, TPG bought Par Pharma for about $1.8 billion following pressures on Par's management from activist firm Relational Investors to sell the company. Its product pipeline has resulted in "significant growth" since the acquisition, said Todd Sisitsky, managing partner of TPG Capital North America.

"We believe (Endo) is paying a significant premium," wrote Jeffrey Loo, an industry analyst at S&P Capital, in a note to investors Monday, pointing out that Endo is paying 18.5 times more than Par's earnings before interest, taxes and other items. "In spite of this sizable deal, we believe (Endo), with its lower tax base since re-domiciling in Ireland, will pursue more acquisitions."

Par's portfolio includes nearly 100 products that are expected to contribute to "double-digit growth" for Endo's overall business, Endo said. It also has more than 115 new drug applications that are filed with the Food and Drug Administration.

The companies also hope to generate $175 million in operational and tax savings within the first 12 months after the transaction closes.

"We share Endo's goal of developing and commercializing generic drugs in areas of greatest revenue potential, complex formulations and longer life cycles," said Paul Campanelli, CEO of Par Pharmaceutical, in a statement.