Warner Chilcott + Actavis = Great Deal
That was quick… Actavis (Ticker: ACT) will acquire Warner Chilcott (Ticker: WCRX) in a stock deal in which each share of Warner Chilcott will receive 0.16 shares of Actavis. I was expecting a cash component, but I actually like this stock for stock deal. The benefits for the combined company will be tremendous. You’re looking at a minimum of 30% accretion to earnings in 2014 and additional cost savings in 2015. I’m planning to hold onto my Warner Chilcott shares through this deal and beyond. This is one of those deals that actually makes sense and will create shareholder value.
Edit: I had some more time to digest this deal and decided to sell my position in Warner Chilcott at $19.69 generating a net gain of 2.93% over an 8 day period (131.73% annualized return). The scenario I fear most is that someone makes a move for Actavis and I’ll be over for Warner Chilcott. A safer play would be to go long in Actavis, which I may do.
posted by Money Turtle @ 7:19 AM
6 comments
6 Comments:
MT,
Well, we love quick and profitable trades like WCRX. We are glad you made a nice profit.
Last Friday a rumor that WCRX canceled a sell side analysts meeting spiked the stock some, I thought it would take at least another week to complete any deal. Well, we were surprised this morning. I would have liked to see a higher price but ACT had to be careful not to overpay. I think the market liked the announcement today.
All of the comments this past weekend, indicate ACT needed WCRX to remove the target from its back. They will benefit nicely from the tax advantages of Actavis plc. WCRX only had one savior and ACT was it. WCRX used the timing to their advantage. I wish the combined company all of the best. WCRX stock price going forward will be tied to ACT stock price. Alot of price variance today as portfolio managers and arbs adjust for the pai trade. The best way to track both is to add (WCRX+ACT) stock prices if your brokerage account will allow. Its called a ratio chart. Use last Fridays ratio for a benchmark. It was $144.71. Todays intra day high was $151.44.
You can do the same for LIFE+TMO.
Holding WCRX or ACT stock with todays price action would be a little unnerving. I sold my deep in the money calls early in the day and I am trading JUN PUT option credits to round out my gains.
Regarding,
inforesource7
MT,
Have you been keeping up with the Royalty Pharma and ELN soap opera?
"Echo Pharma Acquisition Limited announced, pursuant to Rule 2.5 of the Irish Takeover Rules (the "Announcement"), a firm intention to increase its offer for Elan Corporation, plc (NYSE: ELN) to $12.50 per share in cash. The increased offer is fully financed, cash confirmed and not conditional on due diligence. The $1.00 per share net cash right has been eliminated. Royalty Pharma has reserved the right to waive down the Acceptance Threshold for the increased offer from 90 percent to 50 percent plus one Elan Share and will update Elan Stockholders in this regard in the Revised Offer Document.
Royalty Pharma is offering a compelling value of $4.6 billion for Elan's Tysabri Royalty, a 42 percent premium to the $3.25 billion at which Elan sold approximately half of its interest in Tysabri to Biogen. The increased offer also represents a premium of 45 percent to the Undisturbed Elan Enterprise Value.
Royalty Pharma believes that Elan dramatically overpaid in the Theravance Transaction by agreeing to pay $1 billion for 21 percent of selected royalties owned by Theravance when all of Theravance was trading at $3.5 billion. Royalty Pharma is assessing the transactions announced today. The increased offer is therefore conditional on Elan Stockholders voting against the Theravance Transaction and all transactions announced today that are put to a shareholder vote."
Regards,
inforesource7
I was expecting a cash component and of course a higher premium, but no complaints. I made some $ and now it's time to move on. It's hard to hold onto a position in WCRX with other players still wanting a piece of ACT.
I haven't been really following ELN and Royalty Pharma. It's just hard for me to see Royalty Pharma succeeding in acquiring ELN. I will need to take a closer look and see what all this fuss is about.
MT,
Here is an article that may help add some color to the Royalty Phrama and ELN soap opera. Any opinions you have on what ELN is trying to do would be appreciated.
http://dealbook.nytimes.com/2013/05/20/royalty-pharma-raises-bid-for-a-resistant-elan/
Regards,
inforesource7
MT,
Bernstein analyst chatter that MYL could offer $22.00 for WCRX but not likely.
What is your opinion on MYL and WCRX? Would that be a good fit?
Regards,
inforesource7
I don't see MYL going after WCRX. MYL already has a good presence in women's health and they are looking for something with scale such as ACT.
In regards to ELN, I'm kind of scratching my head on this one. They're paying a lot for a piece of Theravance. Not exactly creating value for shareholders in my opinion.
Just saw Reuters article regarding LIFE. Very interesting on how SIAL teamed up with Roche to go after LIFE.
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