Join        Login             Stock Quote

How Bayer Could Benefit From Potential Warner Chilcott Buyout

 May 01, 2012 02:48 PM

(By Mani) Warner Chilcott plc (Nasdaq:WCRX) said Monday that it is exploring a broad range of strategic alternatives to enhance shareholder value, which include preliminary discussions with potential bidders. Goldman Sachs is the financial adviser to the company in this regard.

The announcement came after The Times (of London) reported last Friday that Germany's Bayer AG could offer as much as $32 per share for Warner Chilcott, implying a premium of 70 percent over Warner Chilcott's closing price on March 27.

Ireland-based Warner Chilcott is a leading specialty pharmaceutical company currently focused on the women's healthcare, gastroenterology, dermatology and urology segments of the branded pharmaceuticals market, primarily in North America.

[Related -Forest Laboratories, Inc. (NYSE:FRX): Should Astrazeneca Plc Buy Forest Labs?]

The acquisition of Procter & Gamble's global branded pharmaceuticals business in October 2009 transformed Warner Chilcott into a global pharmaceuticals company with significant scale and geographic reach.

"Assuming a (conservative) fundamental share value of $24, we have tried to gauge the premium a bidder would be willing to pay for Warner Chilcott. We estimate a range of $27- $32 per share could be entirely feasible," RBC Capital Market analyst Shibani Malhotra wrote in a note to clients.

A potential bidder could remove 10 percent to 30 percent of Warner Chilcott's total selling, general and administrative and R&D costs. Based on increased visibility into the pipeline, would recognize an incremental 50-125 percent of R&D in value for this. The bidder would be willing to give 50 percent of the synergy value and 100 percent of incremental recognized pipeline value to Warner Chilcott shareholders

[Related -Hologic Inc. (HOLX) Q3 Earnings Preview: New, Old Management With A New Tone?]

Malhotra said Bayer could be looking to increase its SG&A infrastructure in the US. It appears that Bayer's pharmaceuticals commercial infrastructure is mostly ex-US whereas Warner Chilcott has a strong US presence.

In addition, Bayer's global reach offers a meaningful opportunity to market Warner Chilcott's portfolio globally, particularly in emerging markets. As of March 31, Bayer has about 1.31 billion Euros in cash and cash equivalents.

With a strong cash balance, Bayer could take Warner Chilcott's oral contraceptive franchise as well as products such as Asacol global. In 2011, Asacol generated $743 million in sales.

Bayer could be interested in Warner Chilcott's oral contraceptive portfolio given the issues with its own YAZ franchise.

Next Page >>12


Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageAutomating Ourselves To Unemployment

In this current era of central planning, malincentives abound. We raced to frack as fast we could for the read on...

article imageFed: Waiting For June… Or Godot?

The Federal Reserve left interest rates unchanged yesterday, as widely expected. But the possibility of a read on...

article imageThe Single Best Place To Invest Your Money For Retirement

It was never supposed to be this daunting. At least that's what we were read on...

article imageNegative Blowback From Negative Interest Rates

The Federal Reserve is widely expected to leave interest rates unchanged today. But perhaps standing pat read on...

Popular Articles

Daily Sector Scan
Partner Center

Related Articles:

Merger Arbitrage Mondays – June 3, 2013
More Articles on: Medical

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.