Forest Labs buying specialty gastrointestinal and cystic fibrosis company Aptalis for $2.9B

NEW YORK, N.Y. – Forest Laboratories is buying Aptalis, which specializes in treatments for gastrointestinal problems and cystic fibrosis, for $2.9 billion in cash.

Shares of Forest Labs surged in premarket trading Wednesday.

Forest Labs President and CEO Brent Saunders said in a statement Wednesday that the transaction would help his company diversify its business. There’s an anticipated $125 million in cost savings from the combination by 2016.

Forest Laboratories Inc. is buying the privately held Aptalis from its shareholders, which include private investment firm TPG.

Aptalis had $688 million in sales in fiscal 2013, which ended in September. Its top three U.S. products, Canasa, Carafate, and Zenpep, made up more than 60 per cent of its total 2013 sales. International sales comprised about 15 per cent of revenue. Third-party delivery technology provider and drug maker Aptalis Pharmaceutical Technologies accounted for about 15 per cent of revenue.

Forest Labs said that it plans to fund the deal with available cash and debt. The company said due to the acquisition it has not yet started its previously announced accelerated stock repurchase program. Forest Labs said that once it completes permanent financing for the buyout that it will consider starting the accelerated stock repurchase program.

The acquisition is expected to add about 78 cents per share to Forest Lab’s 2015 adjusted earnings and almost $700 million in revenue.

The deal requires review by anti-trust authorities in the U.S. and Canada. The buyout is targeted to close in the first half of 2014.

Forest Labs’ stock rose $5.89, or 10 per cent, to $64.65 in premarket trading about 1 1/2 hours before the market open.