May 6, 2011 6:00 AM

Dealmakers of the Week: David Fox and Jeffrey Symons of Kirkland & Ellis

Posted by Tom Huddleston Jr.

DEALMAKERS

David Fox (photo, right) and Jeffrey Symons, M&A partners in the New York office of Kirkland & Ellis.

THE DEAL

The $6.8 billion acquisition of Frazer, Pa.-based drug company Cephalon, Inc., by Teva Pharmaceutical Industries Ltd., was announced Monday.

THE CLIENT

Israeli-based Teva is the world's largest producer of generic drugs and reported more than $16 billion in sales in 2010.

THE DETAILS

Teva will pay $81.50 per Cephalon share as part of its cash offer, which represents a 39 percent premium over Cephalon's closing price on March 29--the last day of trading before Cephalon received a competing, unsolicited offer from Valeant Pharmaceuticals International Inc. Valeant made a $5.7 billion, $73 a share, hostile bid in March for Cephalon after being rebuffed on previous offers, according to The New York Times. Valeant dropped its bid, for which it had set a deadline of May 12, according to Financial Times.

Teva's deal for Cephalon is expected to close in the third quarter. Cephalon retained Skadden, Arps, Slate, Meagher & Flom as counsel for negotiations with Teva, and with Valeant.

THE BIG PICTURE

By beating out Valeant's bid for Cephalon, Teva acquires a target that would add at least one blockbuster drug to its product roster. Cephalon's narcolepsy drug Provigil accounted for $1.12 billion of the company's $2.8 billion in 2010 revenue, according to Bloomberg. That addition comes in handy for Teva, whose biggest product--Copaxone--will face generic competition in the next few years. Cephalon says it has a pipeline of experimental drugs that it hopes to take to market by 2016 that potentially could generate $9 billion in annual sales, including stem-cell treatments and therapies for asthma and lung cancer, Bloomberg reports. 

The combined companies would boast roughly $7 billion in annual branded drugs sales, according to Teva's press release, and Teva plans to cut $500 million in annual expenses within three years.

THE BACKSTORY

Fox says that Teva has long been a litigation client of Kirkland's and that this deal represents only the second time that firm has worked on a transaction for the company. "The relationship has been at Kirkland for a long time," he says. "It's a litigation relationship. It's a strong relationship."

Kirkland's first deal work for Teva came in March 2010, less than a year after Fox joined the firm from Skadden, when Teva paid $5 billion for German generic drug maker Ratiopharm. Fox took a lead role on both deals, and Symons--who joined Kirkland in 2006--did his first acquisition work for the client on this deal.

Prior to the Ratiopharm deal, Teva had a long history of going to Willkie Farr & Gallagher on major transactions. Willkie advised Teva in 2008, when the company paid $7.5 billion to acquire Barr Pharmaceuticals. After the Ratiopharm deal, Willkie corporate partner Jeffrey Hochman told us that Kirkland's role in that transaction was not a sign that Teva would begin to move more deal work to that firm, and away form Willkie. 

For his part, Fox welcomes more work from a client that he calls "an outstanding company." He adds: "We'd love to [do more deal work for Teva] and we would hope that they would continue to use us."

ON CLOSING

Valeant's hostile bid and looming deadline required a hastened approach for the Kirkland team led by Fox and Symons. "There's a clock ticking for their consent solicitation so obviously it put a lot of pressure on the system," Fox says.

It helped, he adds, that he had a great deal of familiarity with friends and former colleagues on the other side of the table. Fox has known and worked with lead Skadden partners Eileen Nugent and Neil Stronski for years. "I think that's a big part of being able to get a deal so quickly and so efficiently was that relationship of trust and confidence in each other, and respect for each other," he says.

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