Pittsburgh (ots/PRNewswire) -
- Combination Creates a World Class Global Generics Leader -
- Significant Scale and Breadth Will Drive Major Operating
- Highly Complementary Transaction Further Strengthens Mylan's
Product Portfolio -
- Accelerates Mylan's Revenue and Earnings Growth -
- Anticipated to be Cash EPS(1) Neutral in 2nd Full Year -
Mylan Laboratories Inc. (NYSE: MYL) and Merck KGaA today announced
the signing of a definitive agreement under which Mylan will acquire
Merck's generics business ("Merck Generics") for EUR 4.9 billion
(US$6.7 billion) in an all-cash transaction. The combination of Mylan
and Merck Generics will create a vertically and horizontally
integrated generics and specialty pharmaceuticals leader with a
diversified revenue base and a global footprint. On a pro forma
basis, for calendar 2006, the combined company would have had
revenues of approximately US$4.2 billion, EBITDA of approximately
US$1.0 billion and approximately 10,000 employees, immediately making
it among the top tier of global generic companies, with a significant
presence in all of the top five global generics markets.
In addition to retaining Hank Klakurka, currently President and
CEO of Merck Generics, Mylan has executed long-term employment
agreements with members of Merck Generics' senior management team,
ensuring that senior leadership remains intact. Mylan views the
existing management and employees of Merck Generics as key to the
success of the combined company.
Robert J. Coury, Mylan's Vice Chairman and Chief Executive
Officer, commented: "Mylan's acquisition of Merck Generics would
substantially complete the execution on one of its long-term visions:
to create a world class global quality generics leader. The fit
between our two companies is truly outstanding. Mylan is already a
leader in the U.S., the world's largest market, and through Matrix
Laboratories controls one of the broadest API platforms in the world.
Merck Generics provides us with leading positions in many of the
world's other key regions. Together, we will form a powerful,
diverse, robust and vertically integrated generics platform.
@@start.t1@@ (1) Cash EPS represents EPS adjusted for amortization expense related to
The combination with Merck Generics will significantly extend our
range of therapeutic categories and dosage forms, and bring us a
number of new, differentiated products and successful franchises."
Merck Generics is a subsidiary of Merck KGaA, a more than 300-year
old global chemical and pharmaceutical conglomerate. Merck Generics
has sales in more than 90 countries and is the world's number three
ranked generics business by 2006 calendar year revenues. It has more
than 400 high quality products and 70% of its revenues are generated
from countries where it is a top three player. Merck Generics' U.S.
specialty pharmaceuticals business, Dey, is focused on respiratory
and allergy products and had US$650 million in revenues in 2006.
Merck Generics reported sales of EUR 1.8 billion (US$2.45 billion)
and EBITDA of EUR 335 million (US$450 million) in 2006. The business
employs approximately 5,000 people worldwide.
Hank Klakurka, President and CEO of Merck Generics, said: "My
management team and I are extremely excited to be joining the Mylan
team. We believe Mylan is the best possible acquirer for our company.
The two businesses are an excellent fit in terms of geography and
product mix, and together we can offer extremely attractive product
baskets across our combined territories. Mylan has established itself
as a leader in the U.S. in terms of quality, manufacturing excellence
and customer service, and has demonstrated a strong commitment to its
employees and the communities in which it operates. My team and I
look forward to working with Mylan to build an undisputed world
leader in quality generics."
The acquisition offers a unique, compelling opportunity to create
a global generics leader with critical mass in most of the important
generics markets. The transaction positions Mylan to leverage
substantial growth opportunities and maximize operating efficiencies
driven by global scale.
@@start.t2@@ -- Leadership and scale in key global regions: The transaction creates
critical mass by combining Mylan's leading position in the U.S. with
Merck Generics' broad geographic mix, including leading positions in
Australia, France, Japan, Portugal, Spain and the U.K. This global
footprint creates substantial growth opportunities, and reduces the
risks associated with over-reliance on any one region.
-- Broad and diversified product portfolio: The new company will be well
diversified across most therapeutic areas with approximately 560
-- Differentiated dosage form expertise: The combined company will have
manufacturing capabilities in several specialized dosage forms
including solid orals, patches, controlled-release and high potency
formulations, antibiotics, sterile liquids, inhalants and creams. Many
of these dosage forms benefit from barriers to competition and longer
product growth cycles. Additionally, Merck Generics has a highly
successful product sourcing and in-licensing strategy that has allowed
the company to develop critical mass in key differentiated dosages in
-- Vertical integration and API supply: Together, Mylan and Merck
Generics will benefit from significant savings driven by Matrix's low
cost, high quality API capacity and the benefits of manufacturing high
product volumes for multiple markets around the world. In 2007, Mylan
completed its acquisition of a 71.5% stake in India-based Matrix, the
second largest API manufacturer globally, with more than 165 APIs in
the marketplace or under development.@@end@@
Under terms of the transaction, which have been unanimously
approved by Mylan's Board of Directors, Mylan will acquire 100% of
the shares of the various businesses comprising Merck Generics for a
cash consideration of EUR 4.9 billion (US$6.7 billion). Mylan has
secured fully committed debt financing from Merrill Lynch, Citigroup
and Goldman Sachs.
The transaction is anticipated to be dilutive to full-year cash
EPS(1) in year one, breakeven in year two, and significantly
accretive thereafter based on management's internal projections. The
company is committed to reducing its leverage in the near term
through the issuance of US$1.5 billion to US$2.0 billion of equity
and equity-linked securities. The combined company will generate
substantial free cash flow that will further enable it to rapidly
reduce acquisition-related debt. Reflecting its more leveraged
capital structure and focus on growth, Mylan is suspending the
dividend on its common stock.
Mylan expects to achieve synergies of approximately US$250 million
by the end of year three. The majority of these synergies will result
from vertical integration of Merck's API supply by leveraging the
Matrix platform, aligning capabilities in research and development,
and driving further efficiencies in increased manufacturing volumes
of key products across the globe.
Mylan does not anticipate significant reductions in headcount at
Mylan, Matrix or Merck Generics in order to achieve these synergies.
The combined company will have a dramatically accelerated growth
profile with long-term compounded net income growth expected to
exceed 30% per annum and long-term revenue growth in excess of 10%.
This growth will be driven by new opportunities created by the
formation of a truly global platform, through promising growth at
Merck Generics, and by expected de-leveraging of the balance sheet.
The transaction remains subject to regulatory review in relevant
jurisdictions and certain other customary closing conditions, and is
expected to close in the second half of 2007.
Mr. Coury concluded: "We have been very impressed by the
successful business built by the management team and employees at
Merck Generics and by their dedication to excellence across all areas
of their operations. We look forward to working together to create
greater opportunities for all employees of Mylan and Merck Generics,
as well as to uniting two cultures built on excellence in regulatory,
R&D, manufacturing and customer service in one of the world's largest
global generic pharmaceutical companies."
Merrill Lynch acted as exclusive financial advisor and provided a
fairness opinion to Mylan in this transaction. The external legal
counsel for Mylan was Cravath, Swaine & Moore LLP.
Conference Call and Webcast Information
Mylan will host a conference call and webcast for investors and
analysts on Monday, May 14, 2007 at 8:00 a.m. EDT / 2:00 p.m. CET to
discuss the transaction. To participate in the conference call,
please +1-800-657-1263 (U.S.) or +1-973-633-8200 (international)
fifteen minutes before start time. The pass code for the live call
is 8805204. A telephonic replay of the call Will be available by
dialing +1-877-519-4471 (U.S.) or +1-973-341-3080 (international).
The replay participant code is 8805204.
Live audio of the conference call and slide presentation will be
simultaneously broadcast over the Internet. The webcast of the
conference can be found on Mylan's Web site, www.mylan.com. The
webcast will be archived and available for replay after the event.
Mylan Laboratories Inc. is a leading pharmaceutical company with
three principle subsidiaries, Mylan Pharmaceuticals Inc., Mylan
Technologies Inc. and UDL Laboratories Inc., and a controlling
interest in Matrix Laboratories Limited, India. Mylan develops,
licenses, manufactures, markets and distributes an extensive line of
generic and proprietary products. For more information about Mylan,
About Merck Generics
Merck Generics offers affordable standard therapies in nearly all
major therapeutic areas through high-quality drugs containing active
ingredients that are no longer patent protected. The range of
products includes a wide assortment of more than 400 different
substances plus special dosage forms and delivery systems with high
Forward Looking Statements
This press release contains statements that constitute
"forward-looking statements", including with regard to the expected
future business and financial performance of Mylan Laboratories Inc.
("Mylan" or the "Company") resulting from and following the planned
acquisition of the generics business of Merck KGaA, such as the
generation of cash flows; anticipated synergies and efficiencies;
anticipated cost savings; the Company's ability to reduce debt; and
expectations for long-term growth. These statements are made pursuant
to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Because such statements inherently involve risks
and uncertainties, actual future results may differ materially from
those expressed or implied by such forward-looking statements.
Factors that could cause or contribute to such differences include,
but are not limited to: factors relating to satisfaction of the
conditions to the acquisition, including regulatory approvals;
challenges and costs relating to integration of the two businesses;
the effect of any changes in customer and supplier relationships and
customer purchasing patterns; the impact and effects of legal or
regulatory proceedings, actions or changes; general market perception
of the transaction; the effects of vigorous competition on commercial
acceptance of the companies' products and their pricing; the
potential costs and product introduction delays that may result from
use of legal, regulatory and legislative strategies by Mylan's
competitors; uncertainties regarding patent, intellectual and other
proprietary property protections; exposure to lawsuits and
contingencies associated with both companies' businesses; the ability
to attract and retain key personnel; prevailing market conditions;
changes in economic and financial conditions of the Company's
business; uncertainties and matters beyond the control of management;
and the other risks detailed in the periodic filings filed by the
Company with the Securities and Exchange Commission. The Company
undertakes no obligation to update these statements for revisions or
changes after the date of this release.
Web site: http://www.mylan.com
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