Update: Questcor Shareholders Are The Net Gainers Of Acquisition Deal

Aug.19.14 | About: Mallinckrodt PLC (MNK)

Summary

Mallinckrodt has completed the acquisition of Questcor Pharmaceuticals.

As we expected, the deal went through without any troubles as the deal was beneficial for both sets of shareholders.

It has further proved our point of view that the Questcor shareholders will be the major gainers from this deal.

Mallinckrodt (NYSE:MNK) completed the acquisition of Questcor Pharmaceuticals (QCOR) as both the companies received strong approval from the shareholders in their separate general meetings. As a result, Questcor has officially become a part of Mallinckrodt. The deal is expected to be immediately accretive to Mallinckrodt as Acthar gel is an extremely attractive drug, and its sales are growing at a rapid pace. Questcor shareholders will receive $30 in cash and 0.897 of Mallinckrodt share for each Questcor share. The deal represented substantial premium for Questcor shareholders and the transaction will cost $5.8 billion to Mallinckrodt.

As we expected, the deal has gone through without any troubles. The deal made sense for both the companies - Questcor shareholders were getting a good deal - Questcor shareholders were being offered straight cash along with the opportunity to enjoy the future growth of the drug in the shape of Mallinckrodt shares. So, the shareholders were not just getting considerable premium and cash for the shares of Questcor; they were also still going to enjoy the future growth of Acthar as the drug continues to grow. Furthermore, the Mallinckrodt shareholders were getting a rapidly growing product which would considerably enhance the revenue and earnings growth of the company as Acthar is a high-margin product due to it being an orphan drug. It is a solid addition to the portfolio of Mallinckrodt.

We believe the Questcor shareholders will continue to enjoy the solid growth of the drug and a better tax environment in Ireland will also be a plus for the business. Furthermore, the deal will give Acthar further exposure on the global level and enhance its sales. We reaffirm that Questcor shareholders have been the net gainers of this deal and along with a healthy cash inflow; they will continue to benefit from the future growth of the product. The rapidly growing sales of Acthar will have a positive impact on the stock price of Mallinckrodt and there is a potential of solid capital gains over the next few quarters.

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