Novartis to become world's biggest generic drugs maker

The Swiss drugs firm Novartis today agreed to buy German firm Hexal and most of US company Eon Labs in deals worth €5.6bn (£3.8bn). The acquisitions will make it the world's largest generic drugs manufacturer.

The Swiss drugs firm Novartis today agreed to buy German firm Hexal and most of US company Eon Labs in deals worth €5.6bn (£3.8bn). The acquisitions will make it the world's largest generic drugs manufacturer.

Novartis will gain a leading position in the major markets for generic drugs, which are chemically identical to more expensive branded rivals, in Germany and the US. It is buying 100% of Hexal and 67.7% of Eon Labs from the Struengmann family, of Germany.

The Swiss company will launch a tender offer to buy the remaining shares of Eon Labs for €23.7 per share, and will merge the two companies into its Sandoz unit, which is currently the world's second largest generics maker.

Daniel Vasella, the Novartis chairman and chief executive, has long coveted the top spot in the global generics market. The firm acquired Lek, of Slovenia, in 2002, and bought Sabex, of Canada, last year.

The deal to buy Hexal and Eon Labs will create cost synergies of $200m (£105.4m) a year within three years of closing, half of which would be realised within 18 months, Novartis said. The company said the transactions would boost profits within 12 months of closing, which it expects to happen in the second half of the year if regulators approve the deals. It said it would consolidate various departments as part of the merger.

"The strong growth outlook for Sandoz, which will create jobs, is expected to partially compensate for necessary reductions in the work force," the company said in a statement.

Basel-based Norvatis said it would have had combined generic sales of around $5.1bn in 2004 if the takeover deals had been in place then. The figure compared with $4.8bn for the current world leader, Israel's Teva Pharmaceuticals.

Shares in the German generic drugmaker Stada Arznemittel soared by almost 10% on hopes that it would be the next takeover target for Novartis.

Contributor

Mark Tran and agencies

The GuardianTramp

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