Watson Acquires Arrow - Analyst Blog

Watson Pharmaceuticals Inc. (WPI) recently completed its acquisition of privately held Arrow Group. The company closed its $1.75 billion cash and stock buyout of Arrow after receiving the green signal from the Federal Trade Commission (FTC).
 
The terms of the deal, initially announced in June 2009, included a cash payment of $1.05 billion, and the issuance of 16.9 million shares of Watson common stock. Moreover, $200 million in the form of zero-coupon, non-convertible preferred shares were placed in escrow for the benefit of the Arrow shareholders. These shares will be redeemable in 2012. Arrow shareholders will also receive additional contingent payments based on sales of the authorized generic version of Pfizer’s (PFE) Lipitor.
 
Watson used cash on hand and borrowings of $275 million under its $500 million revolving credit facility to finance the cash part of the transaction. The transaction is expected to be accretive to cash earnings per share in 2010 before synergies, excluding the effect of transaction-related expenses and the amortization of intangible assets.
 
The Arrow acquisition should help Watson expand its footprint in ex-U.S.
territories, especially in countries like Australia , New Zealand , Brazil , Scandinavia , Germany , Central and Eastern Europe , Turkey , Japan and South Africa . It should boost Watson’s product offerings and pipeline.
 
Importantly, Arrow has exclusive U.S. rights to launch the authorized generic version of Lipitor in November 2011, which should be a major contributor to the top-line. The acquisition will also provide Watson with operational expertise and manufacturing capability needed to support its long-term investment in generic biologics.
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