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Warner Chilcott Luring Drug Buyers With Most Free Cash: Real M&A

Posted on 04 May 2012

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Warner Chilcott offers potential acquirers the chance to buy a company in a M&A deal, that throws off more cash from selling contraceptives and colitis treatments than any specialty drugmaker in the world.

Shares of the Dublin-based company surged to a nine-month high this week after Warner Chilcott said it’s exploring M&A options and holding talks with possible buyers.

The $5.5 billion company, which gained 27 percent since takeover speculation emerged less than a week ago, still has a free cash flow yield that’s 20 percent of its share price, about 10 times more than the median for comparable drugmakers with at least $1 billion in market value, according to data compiled by Bloomberg.

While analysts are predicting Warner Chilcott’s sales will decline this year as it faces competition from generic copies of its drugs, Invesco Ltd. and RBC Capital Markets said the company could fetch at least $27 a share in a takeover, a 23 percent premium to yesterday’s price.

A larger drug company could benefit by expanding sales of Warner Chilcott’s top brands such as Asacol, which treats intestinal inflammation, and cutting costs to boost profits, Invesco said.



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