Hospira To Pay About $2 Billion For Mayne Pharma

Hospira Inc. agreed to acquire Australian generic-pharmaceuticals maker Mayne Pharma Ltd. for about $2 billion, the companies said.

The deal is the largest corporate move yet for the two-and-a-half-year-old Hospira, which is a hospital-products spinoff of health-care giant Abbott Laboratories. Hospira has a big business in injectable pharmaceuticals, which package medications in prefilled syringes while also creating vials of medicine used in standard doctor's needles.

It also makes and sells products such as intravenous drug-delivery equipment and patient-controlled drugs for pain management.

Melbourne-based Mayne is a world leader in generic injectable pharmaceuticals, with its strongest presence in cancer treatments. Last year, the company registered sales of about $517 million, an increase of more than one-third from the previous year.

Hospira is expected to pay a 32% premium to where Mayne's shares closed on Sept. 18, marking a total price of about $2 billion. That figure represents about one-third of Hospira's overall market capitalization, making the deal a significant step for the Lake Forest, Ill., company. The company plans to finance the purchase almost entirely with new debt.

Prior to this transaction, Hospira has been weighted heavily toward domestic sales. In 2005, for instance, U.S. sales made up 83% of the business, with international sales constituting the other 17%.

The company said it hopes to create annual savings of at least $50 million by 2008 and predicted the deal would add to earnings in 2007.

But its measure of earnings accretion excludes transaction-related costs and the amortization of intangible assets. As measured by more rigorous generally accepted accounting principles, the deal won't add to earnings during 2008, Hospira said.

The market hasn't been favorable to Hospira this year. Since January, its shares have declined 14%, while an index of other health-care-equipment makers fell 5%. Investors also value Hospira below its peers, assigning it a price-to-earnings multiple of 19.9, compared with a 21.6 sector multiple, according to data provider Baseline.

Morgan Stanley and law firm Baker & McKenzie advised Hospira. Merrill Lynch & Co. and law firm Clayton Utz advised Mayne.