Endo International plc To Issue Ordinary Shares Worth $2 Billion To Fund Par Pharma Deal

Endo International plc (NASDAQ:ENDP) announced today the re-sizing of its secondary ordinary share offering. The company will now issue 4,024,025 ordinary shares, each valued at $83.25 per share. The aggregate proceeds from the shares will come up to an estimated $2 billion, in comparison to a prior $1.75 billion announced on June 2.

The offering is expected to close on June 10, 2015. The offering’s underwriters have also been provided a 30-day option to buy a supplemental 3,603,603 shares, with the option coming into effect after the final prospectus supplement’s date.

The proceeds from the offering, along with additional debt proceeds and cash on hand, will be used by Endo to finance the purchase of Chestnut Ridge, New York-based Par Pharmaceutical Holdings Inc. The takeover bid was extended last month in a deal worth $8.05 billion that comprises 18 million common shares of Endo and $6.5 billion in cash and includes Par’s outstanding debt.

Endo has also entered into financing agreements with Deutsche Bank and Barclays for the deal, which is being seen as a perfect example of record-high takeover valuations prevailing in the pharmaceutical industry in recent times. The generic drug maker Par Pharma was divested by private equity company TPG Capital to Endo for four times the amount ($1.9 billion) TPG originally paid to purchase Par in 2012. The deal values Par at around 66 times its earnings before interest, tax, depreciation, and amortization (EBITDA) in 2014 and 7.5 times its 2014 sales.

It is noteworthy, however, that no matter how overpriced the Par deal may be for Endo, it holds immense strategic significance for the specialty pharma firm. As per a Bloomberg Intelligence analyst Elizabeth Krutoholow, Par can generate almost $1.2 billion annually in generic sales for Endo, allowing the company to beat Sun Pharmaceutical Industries Ltd. to the fifth lead in the global generic drug industry. Par is lesser known but one of the largest extended release med maker – products that extend absorption of drugs with short half-lives and are difficult to develop and copy. The company has almost 200 Abbreviated New Drug Applications (ANDAs) in the pipeline currently, out of which 115 are under review of the US Food and Drug Administration (FDA).

Endo has made it clear that the current issue of common shares is not contingent on seeing the Par takeover through. Even if the acquisition does not materialize, the company intends to use the raised money for general corporate expenses, including mergers and debt repayments.

Goldman Sachs & Co., JPMorgan, Barclays, and Deutsche Bank Securities are the joint book runners and underwriting representatives for Endo’s offering. RBC Captial Markets also acts as a book-running manager while Citigroup, Morgan Stanley, MUFG, SunTrust Robinson Humphrey, and TD Securities play the role of co-managers of the issue.

Endo shares went up 0.56% in Thursday’s trade to close at $84.18.

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