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May 2, 2011 3:07 PM

Teva Outbids Valeant in $6.8 Billion Deal for Cephalon

Posted by Tom Huddleston Jr.

In an effort to increase its portfolio of branded medicines, Israeli drugmaker Teva Pharmaceutical Industries Ltd. agreed to acquire Cephalon, Inc., for $6.8 billion, the companies announced on Monday

Teva, the world's largest producer of generic drugs, outbid Valeant Pharmaceuticals International Inc. for the Frazer, Pa.-based Cephalon with an $81.50 a share cash offer. Valeant made a $5.7 billion, $73 a share, hostile bid in March for biotech drugmaker Cephalon after being rebuffed on previous offers, according to The New York Times. Valeant dropped its bid for Cephalon on Monday.

Skadden, Arps, Slate, Meagher & Flom represented Cephalon on that hostile bid and a team from the firm is advising on the agreement with Teva. New York M&A partners Eileen Nugent and Neil Stronski are leading the way for Skadden, along with antitrust partner Clifford Aronson and executive compensation partner Regina Olshan. 

Former Ballard Spahr partner and ex-attorney general of Pennsylvania, Gerald Pappert, is general counsel for Cephalon. Richard Egosi is chief legal officer for Teva.

Teva's legal work is going to a Kirkland & Ellis group led by corporate partners David Fox and Jeffrey Symons, and antitrust partner Christine Wilson. Fox also took the lead for Teva in March 2010, when the company acquired German generic drug maker Ratiopharm in a $5 billion deal. 

Previously, Teva turned to Willkie Farr & Gallagher on major transactions--including its $7.5 billion acquisition of Barr Pharmaceuticals in 2008. Fox--who left Skadden in 2009--played a key role in Kirkland's landing of transaction work for Teva. Willkie corporate partner Jeffrey Hochman told us last year that Kirkland's role in the Ratiopharm deal wasn't a sign that his firm would be seeing less deal work from Teva.

Teva would add at least one blockbuster drug with the Cephalon takeover. Cephalon's narcolepsy drug Provigil brought in $1.12 billion of the company's $2.8 billion 2010 revenue, according to Bloomberg. Combined, the companies would have roughly $7 billion in sales from branded drugs each year. Teva said it plans to cut $500 million in annual expenses within three years.

The deal, expected to close in the third quarter, represents a 39 percent premium over Cephalon's closing price on March 29--the last day of trading before Valeant's unsolicited offer.

Sullivan & Cromwell M&A partners Keith Pagnani in New York and Alison Ressler in Los Angeles advised Canada-based Valeant on its bid.

Credit Suisse Group AG served as financial adviser to Teva on the transaction, with Dewey & LeBoeuf partners Morton Pierce and Denise Cerasani representing Credit Suisse.

Fried, Frank, Harris, Shriver & Jacobson advised the bankers from Deutsche Bank Securities and Merrill Lynch who served as financial advisers to Cephalon. Fried Frank's team includes corporate partners John Sorkin and Phil Richter, as well as litigation partners David Hennes and Peter Simmons.

In December, Sidley Austin served as U.S. counsel to Cephalon when it acquired a 20 percent stake in Melbourne-based biotechnology company Mesoblast for $220 million and agreed to pay up to $1.7 billion for licensing rights to the company's stem cell therapies.

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