Actavis to Acquire Forest Labs for ~$25B in Equity, Cash; Both Stocks Surge Higher

Tuesday morning Actavis

and Forest Laboratories, Inc.

announced an agreement under which Actavis will acquire Forest for a combination of cash and equity valued at $25 billion, or $89.48 per Forest share. The terms of the deal are 26.04 in cash and 0.3306 Actavis shares for each share of FRX common stock. This represents a premium of 25 percent over Forest's share price. Rumors of the deal were first reported by The Wall Street Journal late Monday night. The acquisition is expected to yield double-digit accretion to non-GAAP earnings in 2015 and 2016, with significant annual free cash flow generation of greater than $4 billion in 2015, allowing Actavis to rapidly de-lever. Paul Bisaro, CEO of Actavis, will lead the combined company. Three members of the Forest Board of Directors will be named to the Actavis Board. Shares of Forest have since continued their accent and are currently trading north of $95, up 36 percent. Shares of Actavis are up 14 percent and trading above $220.