Actavis Inc (NYSE:ACT) today announced its definitive agreement to acquire Warner Chilcott plc (NASDAQ:WCRX) in an all stock transaction valued at approximately $8.5 billion.

ACT, Actavis

Actavis, Warner Chilcott Deal:

The generic drug maker Actavis Inc (NYSE:ACT) is to acquire the specialty pharmaceutical company Warner Chilcott.

The deal  means that Warner Chilcott shareholders to receive 0.16  shares of Actavis for each Warner Chilcott plc (NASDAQ:WCRX) shares held.  This would value Actavis shares at $20.08, a premium of 4.5 percent over Friday’s close.

Actavis shareholders would receive one share of New Actavis for each Actavis share owned by them.

Shares of Actavis Inc (NYSE:ACT) shot up by 1.8 percent and Warner Chilcott rose by 2.8 percent in premarket trading on the news.

If the deal closes, it would create a leading global pharmaceutical company with combined revenue of about $11 billion. The merger would also create the third largest specialty pharmaceutical company in the United States.

The transaction has been approved by both Boards and hasupport from both the companies’ management teams. The transaction is expected to be completed by the end of this year with the new company likely to be rechristened Actavis Plc. The new company will be incorporated in Ireland, where Warner Chilcott is currently incorporated.

The proposed acquisition would be effected through a ‘scheme of arrangement’ under Irish law. The proposal would be effective after obtaining approval from over 75 percent of shareholders of Warner Chilcott plc (NASDAQ:WCRX), subject to sanction of the Irish High Court.

Last month, Actavis Inc (NYSE:ACT)’s proposal to sell itself to Valeant Pharmaceuticals International Inc. (VRX.T) fell through. Actavis also turned down the proposal from a larger player Mylan Inc. (MYL).

According to Wall Street Journal, Warner Chilcott was taken private in early 2005 in a $3.1 billion deal by many including Bain Capital LLC. Warner Chilcott has shown declining revenue for over one year. On the other hand, Actavis Inc (NYSE:ACT)’s sales have shown improved performance with the launch of new generic drugs.

According to Bloomberg data, with 10 percent stake, Fidelity Management and Research is the biggest shareholder of Warner Chilcott plc (NASDAQ:WCRX), while Fidelity is the second largest shareholder of Actavis with over a 5.7 percent stake.