Concordia Healthcare Corp.’s CEO said the company’s $3.5 billion deal for Amdipharm Mercury Ltd. will give the Toronto-based drugmaker the global scale it needs to go after larger targets.
“It’s a global business now and we can look at doing global deals or regional deals where we could not have done them in the past,” Concordia Chief Executive Officer Mark Thompson said on a conference call Tuesday after the announcement.
Concordia shares fell 11 percent to close at C$98.82 in Toronto. The stock had tripled in the past year as of Friday’s close.
While the transaction will help Concordia diversify, the company may need to sell stock to lower its debt after the deal, said Neil Maruoka, a Toronto-based analyst with Canaccord Genuity.
“We believe the deal results in good accretion as well as a platform to exploit new acquisition opportunities; however, we would be cautious ahead of any potential equity raise,” Maruoka said in a note to clients.
The deal is Concordia’s largest ever. The drugmaker will pay about $3.5 billion in cash, shares and a deferred payment to European private equity firm Cinven Group Ltd. and other investors that own Amdipharm. The transaction is expected to close in the fourth quarter, and the purchase will immediately add to earnings, the companies said in a statement Tuesday.
The deal will allow Concordia to diversify its business outside of the U.S. with Amdipharm operating in more than 100 countries, Thompson said.
“It gives us a scale to really compete against basically anyone now,” he said.
Concordia’s strategy mirrors one used by Valeant Pharmaceuticals International Inc., which has grown through acquisitions. Concordia in April bought assets from Covis Pharma Holdings Sarl for $1.2 billion, after completing or announcing six deals valued at about $1.5 billion since 2013, according to data compiled by Bloomberg.
A combined Concordia and Amdipharm will generate as much as $920 million in revenue this year, the companies said.
Goldman Sachs acted as financial adviser to Concordia, and Sullivan & Cromwell, Fasken Martineau DuMoulin and Simmons & Simmons acted as legal counsel. Jefferies and Rothschild acted as financial advisers to Cinven, and Clifford Chance, Torys and Jones Day acted as legal counsel.