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Endo to Buy U.S. Drugmaker Qualitest for $1.2 Billion

Endo Pharmaceuticals Holdings Inc. agreed to buy U.S. generic-drugmaker Qualitest Pharmaceuticals for about $1.2 billion from private-equity firm Apax Partners LLP. Endo’s shares rose to their highest value in three years.

The cash acquisition will add about $400 million in annual sales and 40 cents to earnings per share excluding some items after closing, Chadds Ford, Pennsylvania-based Endo said today in a statement. Endo repeated its 2010 financial forecast.

The combined company will have revenue of about $2 billion and more than 3,000 employees. Endo and Qualitest have 46 generic-drug applications under review by the U.S. Food and Drug Administration, including treatments for pain, cancer and high blood pressure, Endo said.

”Any time you can add as much in earnings per share as they’re doing without paying too much, it’s a smart acquisition,” said James Molloy, a Boston-based analyst for Caris & Co., in a telephone interview.

Endo climbed $2.49, or 8.1 percent, to $33.10 at 4:00 p.m. New York time in Nasdaq Stock Market composite trading, its highest closing price since August 2007.

“If we can’t supply a diverse portfolio at various value points, we’re not going to be long-term players” said Chief Executive Officer David Holveck in an interview today. “Building and diversifying has been the plan from day 1.”

Endo said it plans to retain closely held Qualitest’s facilities, which are located in Huntsville, Alabama, and Charlotte, North Carolina.

Lazard Ltd. served as financial adviser to Endo, while Skadden, Arps, Slate, Meagher & Flom LLP provided legal advice, according to the statement. JPMorgan Chase & Co. and RBC Capital Markets are providing financing commitments. Qualitest’s bankers were from J.P. Morgan Securities LLC, while Kirkland & Ellis LLP acted as legal counsel.

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