Warner Chilcott to Announce a $3B Acquisition of Procter & Gamble’s Drug Unit

Specialty drug maker, Warner Chilcott (NASDAQ:WCRX), is expected to announce as early as Monday the acquisition of Procter & Gamble’s (NYSE:PG) prescription-drug business for about $3 billion, the WSJ reported Sunday, citing a source familiar with the matter.

Six banks, including Bank of America (NYSE:BAC), JPMorgan (NYSE:JPM), Credit Suisse (NYSE:CS), Citigroup (NYSE:C), Morgan Stanley (NYSE:MS), and Barclays (NYSE:BCS), are expected to provide as much as $4 billion in financing for the deal. Roughly $3 billion will go toward the acquisition, with the remainder refinancing $1 billion in existing Warner Chilcott debt, the Journal reported.

The transaction, which should boost the profile of Ardee, Ireland-based Warner Chilcott, would be significant on two fronts, according to the report. It would be the fourth-largest “leveraged loan” of fiscal 2009 in the U.S., and the largest globally for an acquisition. In addition, because it’s a leveraged loan transaction  — a type of loan usually extended to co.’s  with a credit rating below investment-grade or who already carry a considerable amounts of debt — it’s a positive indication of more healing in the credit markets and that the market for loans on highly levered acquisitions, which has been largely shut since the collapse of Lehman Brothers Holdings (OTC:LEHMQ) last Sept,  may be finally warming.

The P&G unit, which was put on the auction bloc last year and has annual sales of around $2 billion, did attract also the interest of Cerberus Capital Management and rival drug-maker Forest Laboratories (NYSE:FRX).  But Warner, notes the Journal, was able to produce the best bid for the Ohio-based unit, poised to be run as a wholly owned subsidiary of Warner Chilcott.

PG shares closed Friday up 56 cents at $53.58 while WCRX shares closed the session up 49 cents at $16.06.

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