Perrigo Co., a maker of over-the-counter drugs and infant formulas, agreed to buy the assets of closely held Paddock Laboratories Inc. for $540 million in cash to expand in generic medicines.
The deal will add 25 cents a share to earnings in fiscal 2012, excluding amortization related to the transaction, Allegan, Michigan-based Perrigo said in a statement today. The company expects the acquisition to close in the fiscal fourth quarter, pending regulatory approval.
Paddock Labs, based in Minneapolis, makes and markets generic pharmaceuticals. The deal will add more than $200 million in annual sales from at least 35 products, Perrigo said. The closely held company also has several experimental products waiting to be approved by the U.S. Food and Drug Administration.
The acquisition “appears to be a logical expansion of the company’s generic prescription business at a reasonable valuation,” said Chris Schott, an analyst with JPMorgan Chase & Co. in New York, in a research report today.
Perrigo gained $4.93, or 7.4 percent, to $71.18 at 4 p.m. New York time in Nasdaq Stock Market trading, for the biggest increase since May. The shares have risen 66 percent in the last 12 months.
The company has announced 14 acquisitions in the last six years with an average disclosed value of $142.3 million, according to Bloomberg data. The largest acquisition was of PBM Holdings Inc. last year for $808 million.
Perrigo expects the deal to provide a tax benefit of about $95 million. The company will fund the transaction with about $80 million cash on hand, $310 million from existing bank debt agreements and $150 million from a new loan.
Morgan Stanley acted as Perrigo’s financial adviser, while Morgan, Lewis & Bockius LLP provided legal counsel. Paddock Labs’ financial advisers were Jefferies & Co. and Greene Holcomb & Fisher, and its legal adviser was Orrick, Herrington & Sutcliffe LLP.