Is Teva Looking to Buy Barr Pharmaceuticals?

Rumors are swirling in the Israeli press, that the world’s largest generic drug maker is about to become much larger. Reports are that the Israeli based Teva Pharmaceuticals (TEVA) is in talks to buy U.S. Generic maker Barr Pharmaceuticals (BRL) for as much as $7.5 billion, a 40% premium to their closing price yesterday. While Barr comes with a fat price tag, the deal would make sense for Teva, as Barr is very active in Central and Eastern Europe, geographies that Teva has been targeting at for future growth.

Teva has around $3 billion in the bank so it appears it is going to have to go out and issue debt to fund the deal. The debt plus the big premium, may pressure the stock price in the short term, but over the long haul, this may prove to be another in a long line of very wise acquisitions.

The deal also brings some pride to the Israeli business community is this would be the biggest M&A in Israeli history. The fact that an Israeli company has the potential to do such a large acquisition is a testament to the ingenuity and steadfastness of the local economy.

Disclosure: The author’s fund has a position in TEVA as of July 17, 2008.

Comments

[Ames Tiedeman:]

They announced the deal this morning. TEVA is a great Israeli company. Do you think they are buying Barr in part because they think their litigation against several generic drug makers will fail?

2008 Jul 18 07:42 AM