Mallinckrodt To Buy Questcor For $5.6 Bln In Cash And Stock

(RTTNews) - Specialty pharmaceuticals company Mallinckrodt Plc. (MNK) and Questcor Pharmaceuticals, Inc. (QCOR), a biopharmaceutical company, Monday said they have entered into a definitive agreement for Mallinckrodt to acquire Questcor in a transaction valued at about $5.6 billion. Shares of both companies were significantly higher in the pre-market trading.

Questcor's primary product, the high-growth H.P. Acthar Gel, is expected to be a strong complement to Mallinckrodt's broadening growth portfolio of specialty pharmaceutical brands, including OFIRMEV, EXALGO and XARTEMIS XR.

Acthar generated net sales of $761.3 million in 2013, an year-over-year increase of 49.6 percent. It is approved by the U.S. Food and Drug Administration for 19 indications.

It is increasingly being employed by specialty physicians to treat a range of serious, difficult-to-treat autoimmune and inflammatory conditions, where patients often have exhausted other good therapeutic options.

The transaction is expected to be immediately add to Mallinckrodt's adjusted earnings per share in fiscal year 2014 and is estimated to be significantly accretive in fiscal year 2015.

The deal, expected to conclude in the third calendar quarter of 2014, was unanimously approved by the Boards of Directors of both companies.

Questcor shareholders will receive $30 per share in cash and 0.897 Mallinckrodt shares for each share of Questcor they own, for a total consideration of around $86.10 per Questcor share.

Following completion of the merger, Mallinckrodt shareholders will own 50.5 percent and former Questcor shareholders will own around 49.5 percent of the combined company's stock.

Based on the closing price of Mallinckrodt and Questcor on April 4, the total per-share consideration represents a premium of 27 percent per share over Questcor's stock price.

The deal is expected to help Mallinckrodt to be an increasingly diversified, high-growth specialty pharmaceuticals company with significantly increased scale, revenues, profitability and cash flow.

Questcor commercial operations will function as a separate business unit within Mallinckrodt's Specialty Pharmaceuticals segment.

Mallinckrodt expects that about 70 percent of the pro forma fiscal year 2014 revenues of the combined company will come from branded and specialty generic pharmaceutical products as well as active pharmaceutical ingredients.

Mark Trudeau, CEO of Mallinckrodt, said, "With Questcor, combined with our recently completed acquisition of Cadence Pharmaceuticals, the new Mallinckrodt will have a significant, established presence with prescribers, payers and hospitals.''

Mallinckrodt said the combined entity's portfolio would include novel therapeutics for pain management, as well as central nervous system, renal, rheumatologic and other autoimmune and inflammatory disorders.

The combined company will be led by Trudeau. Following closing of the deal, Mallinckrodt's Board of Directors will be increased to twelve members, with the addition of three directors from Questcor. Melvin Booth, the current Chairman of Mallinckrodt's Board of Directors, will continue in that role after the transaction is completed.

Mallinckrodt International Finance S.A. has entered into debt financing commitments with Barclays, which, together with cash on hand, should be sufficient to provide the necessary funds to consummate the transaction.

Mallinckrodt expects the financing will consist of a combination of a senior secured term loan facility and senior notes.

MNK, which closed marginally higher at $62.52 on Friday, is surging 9.6 percent in pre-market trading.

QCOR fell 6 percent on Friday to settle at $67.87. The stock is gaining 33.5 percent in pre-market trading.