By Vidya L Nathan and Ankur Banerjee
(Reuters) - Endo International Plc (O:ENDP) said it would buy Par Pharmaceutical Holdings Inc from private-equity firm TPG Capital for about $8 billion, including debt, to become a top-five generic drugmaker by sales in the United States.
Par Pharma was acquired by TPG for $1.9 billion (1.2 billion pounds) in 2012 and since then has shifted focus to make generics that are difficult to make and administer. Such generics offer higher margins than others.
The deal will give Endo five manufacturing plants and about 100 generic drugs such as Par Pharma's two bestsellers, a copy of AstraZeneca's (L:AZN) Crohn's disease treatment, Entocort, and one of GlaxoSmithKline's (L:GSK) cholesterol drug, Lovaza.
"(The price) seemed a little expensive but at least the way Endo is looking at it is that you get cost synergies which make the deal a little more financially doable," Morningstar analyst Michael Waterhouse said.
Endo's shares were down 5 percent at $80.93 in afternoon trading on Monday.
Gabelli & Co's Kevin Kedra said recent M&A activity in the industry had pushed up valuations and Par Pharma's worth had improved as acquisitions made under TPG had boosted performance.
Par Pharma, which filed for a U.S. initial public offering in March, posted a 20 percent jump in sales to $1.28 billion in 2014.
Endo's generic business jumped 56 percent in the same period, due to acquisitions, much faster than total revenue growth of 10 percent. Generics accounted for about $1.14 billion, or 40 percent of revenue.
The worldwide generics market, estimated at $74 billion in 2014, is expected to grow 6.3 percent annually over the next six years, according to market research firm EvaluatePharma.
That growth potential has led to frenzied dealmaking.
Teva Pharmaceutical (ARCA:TEVA) Industries Ltd (TA:TEVA), the No.1 generic drug maker, has made an unsolicited $43-billion bid for Mylan (O:MYL). Mylan is itself trying to buy Perrigo Co Plc (N:PRGO), which has rebuffed the offer.
Endo, which has completed six deals since 2013, lost out to Valeant Pharmaceuticals International Inc (TO:VRX) in a bid to buy Salix Pharmaceuticals Ltd in March.
Endo is offering 18 million shares and $6.50 billion in cash for Par Pharma, whose debt was $2.35 billion as of March.
Endo is expected to issue $4.5-$5.0 billion of new debt to fund the deal, IFR reported.
Barclays (LONDON:BARC), Deutsche Bank (XETRA:DBKGn) and Houlihan Lokey are Endo's financial advisers. JP Morgan is advising Par. Skadden, Arps, Slate, Meagher & Flom LLP is Endo's legal adviser and Ropes & Gray LLP is Par's.