Investopedia: Teva And Cephalon Solve Each Other's Problems

Whenever companies announce a deal, managements try to paint it as a great move for each shareholder group. Experience says that is rarely the case, but Teva Pharmaceuticals' (Nasdaq:TEVA) acquisition of Cephalon (Nasdaq:CEPH) really could be a case where that is true. This deal solves significant, but different, problems for each company.

The Terms Of The Deal
Unlike Valeant's (NYSE:VRX) attempt at a hostile bid (or its thus far unsuccessful attempt to find a friendly agreement with Cephalon's board), Teva pursued a friendly offer and both boards agreed to it unanimously. Teva will acquire Cephalon in an all-cash deal that pays Cephalon shareholders $81.50 - 12% more than what Valeant had offered. The deal amounts to about $6.8 billion for Teva, which will have to raise debt for the bid.

Not Great, But Better
Cephalon shareholders may still grumble at the terms of the deal. After all, less than six times trailing EBITDA and about two times trailing revenue is not an exciting premium. What's more, in recent memory Pfizer (NYSE:PFE) paid for more for King and Abbott (NYSE:ABT) paid for Kos.


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