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FTC Request for ACT-WCRX Deal

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Actavis, Inc. and Warner Chilcott plc recently announced that both companies have received a request from the Federal Trade Commission (FTC) for additional information regarding Actavis’ upcoming acquisition of Warner Chilcott.

As a result, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR Act) will get extended until 30 days after Actavis and Warner Chilcott have complied with the request. This time period may be extended voluntarily by the concerned parties or terminated earlier by the FTC.

Actavis had first announced its intention to acquire Warner Chilcott in May 2013. The stock-for-stock transaction, valued at about $8.5 billion, includes the assumption of Warner Chilcott’s net debt of $3.4 billion.

The successful completion of this deal will lead to the creation of a leading global specialty pharmaceutical company with combined annual revenues of about $11 billion. The combined company will hold the third position in the US specialty pharmaceutical market with annual revenues of about $3 billion.

Actavis and Warner Chilcott continue to expect the deal to close in the second half of this year. The two companies will be combined to form a new company domiciled in Ireland where Warner Chilcott is currently incorporated.

We are positive on this deal which makes strategic and financial sense. The deal is expected to be immediately accretive. Moreover, it will provide strong operating cash flow and allow Actavis to de-lever its balance sheet. The tax rate will also be significantly below current levels.

While Actavis currently carries a Zacks Rank #3 (Hold), Warner Chilcott is a Zacks Rank #2 (Buy) stock.

Other companies that currently look well-positioned include Mylan, Inc. (MYL - Free Report) and Simcere Pharmaceutical Group . Both are Zacks Rank #2 stocks.

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