Ryan Savitz

Teva: What's Next for the 'Generic Giant'?

Well if you look at the history of Teva and how they have grown, it has been through small strategic acquisitions. The Barr acquisition was very large in relation to their historic purchases. If you examine TEVA versus the S&P 500 looking back through the last 5 years, Teva has increased about 46% while the S&P 500 has decreased about 27%. If you examine the bullet points about the acquisition you will notice they are managing it very well and have controlled their working capital:
* Cost synergies will be over $400 million versus the initial estimate of $300 million
* Accretion will be accretive to earnings in third quarter 2009 versus the initial estimate of fourth quarter 2009
* Leverage will return to the level it was before the Barr acquisition in 1 year (decrease from 34% to 24% by the end of 2009)

If you look at Teva during the last 6 months they are pretty much flat (decreased about 1%) while the S&P 500 decreased about 33%. So looking historically and more-so, during the recent economic downturn, Teva has performed extremely well.

You really cannot find any pure large cap companies that have grown organically.

On Mar 25 11:51 AM Chris B wrote:

> So we should buy this company on the basis of how well they've done
> previous acquisitions? Because they're acquisition experts? <br/>
>
> I'll stick with companies that grow organically. All the paper-pushing
> and rebranding in the the world doesn't do much for shareholder value.
> It's still true that 70% of mergers destroy shareholder value...
> so I would say it's an uphill battle for TEVA to create value this
> way even if they've been fortunate in the past.