Corporate News Blog – Impax Labs to Merge with Amneal Pharma Through an All-stock Transaction

LONDON, UK / ACCESSWIRE / October 19, 2017 / Pro-Trader Daily takes a look at the latest corporate events and news making the headlines for Impax Laboratories, Inc. (NASDAQ: IPXL) (“Impax”), following which we have published a free report that can be viewed by signing up at http://protraderdaily.com/optin/?symbol=IPXL. Impax and Amneal Pharmaceuticals LLC, one of the largest and fastest growing generic pharmaceutical manufacturers in the United States, declared that they have entered into a definitive business combination in an all-stock transaction on October 17, 2017. This deal would create the fifth-largest generic-drug Company in US. For immediate access to our complimentary reports, including today’s coverage, register for free now at:

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Expectations for the New Combined Company

A new, publicly traded holding Company, Amneal Pharmaceuticals, Inc., will be formed. It will be ranked the 5th largest generics business in the United States by gross revenue.

As per the agreement, Amneal Holdings’ members immediately prior to the closing of the transaction will receive non-economic, voting shares of Amneal Pharmaceuticals Inc. and will be able to exchange, at or following closing, their membership units in Amneal Pharmaceuticals LLC for class A common shares of Amneal Pharmaceuticals Inc. Thus, immediately prior to the closing of the transaction, Amneal Holdings’ members will own nearly 75% and Impax’s shareholders will own about 25% of the pro-forma shares of the new Company on an as converted basis.

The combined Company is projected to have pro-forma adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) of nearly $700 million to $750 million in 2018, owing to the major cost savings in the first full year of close.

Apart from its broad existing commercial product portfolio, the combined Company is expected to have a diverse and differentiated pipeline with over 300 products either filed with the FDA or in active stages of development, as well as cost-efficient global manufacturing and development capabilities in all dosage forms.

The transaction will be structured as an Up-C transaction, which will have a tax receivable agreement split 85% to 15% between Amneal Holdings’ members and Amneal Pharmaceuticals Inc., respectively.

The New Leadership Team

An experienced team will lead the new combined Company with a proven track record in driving strong organic growth and successfully integrating acquisitions. The Company will be headquartered in Bridgewater, New Jersey,

Amneal’s Founders and Co-Chief Executive Officers, Chirag Patel and Chintu Patel, will serve as Co-Chairmen on the combined Company’s Board of Directors.

On the other hand, Paul Bisaro, President and Chief Executive Officer of Impax, will serve as the CEO, while Bryan Reasons, Senior Vice President, Finance and Chief Financial Officer of Impax, will serve as CFO.

The Board of Directors of the new Company would include 11 members. Of which, Amneal Holdings’ would appoint six and Impax would appoint the remaining five.

Bob Burr, Chairman at Impax, would be appointed as the lead independent director for the Board.

The combined Company is projected to have around 6,500 employees that would operate from strategically positioned locations around the globe.

Strategic Benefits from the Deal

An Enhanced Generics Portfolio: The combined Company will have a generics portfolio with about 165 differentiated product families marketed in all dosage forms. Moreover, the combined Company would hold a no.1 or no. 2 ranks in many of its marketed products.

An Outstanding Generics Pipeline: The combination would create one of the largest generic pipelines in the United States, with nearly 150 pending ANDAs and 165 projects in active stages of development. Besides, about half of all pipeline products are exclusive first-to-file, first-to-market or other high-value opportunities with three or fewer competitors estimated at the time of launch.

Superior R&D Capabilities: The annual research and development (R&D) investment of the combined Company is expected to be around 10% of pro-forma combined net revenue. The R&D will be focused on the strategic development of high-value products within generics and specialty pharmaceuticals. Besides, the new Company would also gain from well-established external partnerships focused on maximizing pipeline opportunities in specialty delivery forms and biosimilars.

Stronger Global Supply Chain Capability: The combined Company would manufacture and distribute its products from a strengthened global supply chain supporting capabilities across all dosage forms, with R&D and manufacturing sites in the US, India, and Ireland.

Growing Specialty Franchise: The new Company includes Impax’s high-margin specialty franchise, which would provide stable cash flow and long-term growth through its innovative platform of products targeting CNS disorders, anti-parasitic infections, and other select specialty therapeutic areas.

Financial Implications

Industry leading growth profile: It is forecasted that the new combined Company would generate annual double-digit growth in net revenue, adjusted EBITDA, and adjusted EPS over the three years post the transaction’s closure. The combination is expected to be accretive to Impax’s adjusted EPS in the first 12 months after close.

A diversified revenue stream: The combination provides meaningful revenue diversification with the top five generic drugs of the combined Company accounting for around 25% of pro-forma net revenue for the last 12 months ended June 30, 2017.

Cost saving opportunities: The transaction is expected to generate annual cost savings of approximately $200 million within three years from the transaction closing, mostly due to complementary nature of the Companies’ combined operations as well as margin-enhancing product transfer opportunities. These savings would be incremental to the previously announced Impax standalone cost savings initiatives.

Increment in cash flow generation: The combined Company is projected to have 2017 pro-forma net revenue ranging from $1.75 billion to $1.85 billion and pro-forma adjusted EBITDA of around $600 million to $650 million in 2017 and $700 million to $750 million in 2018. This includes $80 million to $120 million of annualized cost savings within the first full year of close. The increased cash flow would allow the new Company to pay down its debt, while continuing to invest in R&D and high-growth specialty assets.

Financing

For this transaction, the combined Company has secured fully committed financing from JPMorgan Chase Bank, N.A. and Bank of America Merrill Lynch to refinance both Companies’ currently outstanding debt obligations.

Besides, Amneal Holdings’ members have entered into definitive purchase agreements with select institutional investors including TPG and funds affiliated with Fidelity Management & Research Company to sell 46.8 million unregistered common shares at $18.25 per share in a private placement for gross proceeds of $855 million, or nearly 15% of fully diluted common shares outstanding on a converted basis.

Transaction Closing

The transaction has been unanimously approved by the Boards of Directors of Amneal and Impax, and is also supported by the management teams of both companies.

However, it is subject to the satisfaction of customary closing conditions, such as the receipt of regulatory approvals and Impax’s shareholder approval.

The transaction is expected to close in the first half of 2018.

Last Close Stock Review

On Wednesday, October 18, 2017, the stock closed the trading session at $21.45, surging 11.14% from its previous closing price of $19.30. A total volume of 6.30 million shares have exchanged hands, which was higher than the 3-month average volume of 1.76 million shares. Impax Labs’ stock price soared 2.39% in the past one month, 19.50% in the last three months and 60.67% in the past six months. Furthermore, since the start of the year, shares of the Company have skyrocketed 61.89%. At Wednesday’s closing price, the stock’s net capitalization stands at $1.59 billion.

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