MALVERN, Pa. (AP) — Endo Health will spend about $1.5 billion to buy the Canadian specialty drug maker Paladin Labs, and both will then be folded into a newly-formed Irish holding company.
Endo also posted better-than-expected third-quarter results Tuesday and issued strong profit guidance for the year. Endo shares soared 20 percent $45.35 in premarket trading.
Endo wants to accelerate its expansion at home and abroad and the acquisition of Paladin is expected to immediately boost profit in 2014.
Cost savings related to the acquisition are expected to total at least $75 million a year, Endo said.
Under the terms of the deal, which is expected to close in the first half of 2014, Paladin shareholders will receive 1.6331 shares of stock in the new company and 1.16 Canadian dollars ($1.11) in cash for each share.
Based on Endo's Monday closing stock price of $43.64, the stock portion of the deal is worth $71.27, bringing the total value to $72.38 per Paladin share. That represents an 18 percent premium over the closing price for shares of Paladin Labs Inc., at 63.91 Canadian dollars ($61.36).
Paladin shareholders will also receive one share of Knight Therapeutics Inc., a newly formed Canadian company that is being split off as part of the deal.
Investors in Endo Health Solutions Inc., which is based in Malvern, Pa., will receive one share of stock in the new Irish company, for each of their Endo shares.
When the deal closes, current Endo shareholders will own about 78 percent of the new company, while Paladin shareholders will own the rest. The new company will be led by Endo's current management team. Paladin will be a separate operating company and continue to be led by its current management and maintain its current headquarters in Montreal, Endo said.
Paladin produces treatments for pain, urology and allergy, and it has a strong pipeline of new product launches set to take place over the next 12 months, Endo said.
Endo said its third-quarter net income fell 25 percent, pulled down by hefty charges related to product liability claims and business impairment charges.
The company earned $40.2 million, or 33 cents per share, down from $53.8 million, or 45 cents per share, in the same quarter of 2012. Excluding one-time items, the company posted a profit of $160.7 million, or $1.34 per share, for the recent quarter.
Revenue fell 5 percent to $715 million from $750.5 million.
Analysts, on average, expected a profit of $1.10 per share on $693.9 million in revenue, according to FactSet.
For the full year, Endo expects to post an adjusted profit of $4.60 to $4.75 per share on $2.75 billion to $2.8 billion in revenue. Analysts expect a profit of $4.54 per share on $2.8 billion in revenue.