Forest Laboratories, Inc. (NYSE:FRX) agreed to Acquire Aptalis, a private company with specialty in Gastrointestinal and Cystic Fibrosis for $2.9 billion in cash.

Forest Laboratories

The stock price of Forest Laboratories, Inc. (NYSE:FRX) is surging following the announcement of the transaction. At the time of this writing, around 11:03 A.M. in New York, the stock is trading around $68.28 per share, up by more than 16%.

Details of the acquisition

Forest Laboratories, Inc. (NYSE:FRX) plans to pay the $2.9 billion acquisition price for Aptalis through a combination of cash on hand and debt. The company already secured a commitment for a $1.9 billion bridge facility.

According to the company, the Aptalis acquisition is expected to be accretive to its FY2015 non-GAAP EPS by around $0.78. Forest Laboratories, Inc. (NYSE:FRX) estimated to generate an additional $700 million in revenues from the acquisition for fiscal 2015 and to achieve $125 million in synergies in fiscal 2016.

Forest Laboratories, Inc. (NYSE:FRX) said its previously announced share repurchase program was not yet initiated, but it will consider doing so following the completion of permanent financing for the acquisition.

The transaction is subject to customary closing conditions and regulatory approvals in the United States and Canada. The company expects to complete the transaction in the first half of 2014.

Morgan Stanley (NYSE:MS) served as financial advisor while Debevoise & Plimpton LLP and Cleary Gottlieb Steen & Hamilton LLP served as legal counsel for Forest Laboratories Inc (NYSE:FRX).

Acquisition helps create blockbuster therapeutics areas

In a statement, Brent Saunders, president and CEO of Forest Laboratories, Inc. (NYSE:FRX) said the acquisition will help the company advance its strategy to create blockbuster therapeutics areas.

“Aptalis is an excellent strategic and financial fit for Forest because of its strong product offerings in two therapeutic franchises that are complementary to Forest – GI in the U.S. and Canada and Cystic Fibrosis in Europe,” added Saunders.

Aptalis reported $688 million in sales last year. Its top three products in the United States including Canasa, Carafate, and Zenpep accounted for 60% of its sales in 2013, while its international sales represented 15% of its revenue. Its third party delivery technology provider and drug manufacturer, Aptalis Pharmaceutical Technologies, accounted for approximately 15% of its revenues.