TPG to Acquire Par Pharma for $1.9B

Yet another acquisition agreement was recently announced in the pharma sector. US based specialty pharmaceutical company Par Pharmaceuticals Companies Inc. ( ) entered into an agreement with an affiliate of leading global private equity firm TPG Capitals, whereby TPG will acquire Par Pharma for $1.9 billion.

TPG specializes in leveraged buyouts, recapitalizations, joint ventures, restructuring, etc. Some of its notable investments in the healthcare sector include Aptalis Pharma, Biomet, IMS Health and IASIS Healthcare.

Par Pharma represents strong growth prospects especially given the focus on low cost healthcare solutions and growing demand from an aging population. As of March 31, 2012, Par Pharma had 71 abbreviated new drug applications (ANDAs) filed with the US Food and Drug Administration (FDA) representing more than $20 billion combined branded product sales. These ANDA filings included 21 first-to-file opportunities.

Terms of the Agreement

As per the terms of the agreement, TPG is offering Par Pharma shareholders $50 in cash for each share of Par Pharma’s common stock. The offer price represents a premium of approximately 37% over the July 13, 2012 closing share price, which was the last full trading day before the announcement.

However, the agreement also permits Par Pharma’s Board of Directors to search for alternative superior proposals until August 24, 2012, from other bidders. Prospective suitors could include other generic players or ex-US companies looking to strengthen their presence in the US. If no alternative offer turns up, the TPG deal is expected to go through in 2012.

We note that merger and acquisition activities continue to heat up in the pharma/biotech sector. Over the last few weeks, major deals have been announced including Bristol-Myers Squibb's ( BMY - Analyst Report ) upcoming acquisition of Amylin Pharmaceuticals, Inc. ( ) and GlaxoSmithKline's ( GSK - Analyst Report ) deal with Human Genome Sciences, Inc. ( )

We currently have a Neutral recommendation on Par Pharma. The stock carries a Zacks #3 Rank (Hold rating) in the short run.