US firm Lannett has entered a definitive agreement to acquire Belgian drugmaker UCB's generic unit Kremers Urban Pharmaceuticals (KU) for $1.23bn in order to expand its specialty generic drugs portfolio.
The deal also includes potential contingency payments, and is expected to add to Lannett's adjusted EPS in fiscal 2016.
The company expects to receive around $100m in benefit because it elected to use rules in section 338(h)(10) of the tax code, which involve purchasing at least 80% of the shares of the target company.
Unanimously approved by the boards of directors of Lannett and UCB, the transaction is expected to close in the fourth quarter of this year and is subject to regulatory approval and other customary closing conditions.
Lannett chief executive officer Arthur Bedrosian said: "For Lannett, this is a transformational acquisition that is an exceptional strategic fit and builds upon our stellar financial performance over the last several years.
"With KU, we are adding a highly profitable business and creating a specialty pharmaceuticals company that has substantial size, scale and reach.
"The acquisition diversifies and augments our current product offerings and significantly enhances our opportunities for continued growth by expanding our pipeline with a number of large market opportunity and complementary product candidates."
Currently, KU has 18 generic drugs in the market that treat a variety of conditions, including attention deficit hyperactivity disorder (ADHD), gastroesophageal reflux disease, hypertension and respiratory disease.
KU also has 11 drug applications pending approval from the US Food and Drug Administration (FDA) and 17 drug candidates in development.
Bedrosian added: "KU brings considerable manufacturing capacity, a first class research and development team and the potential for advancing our active pharmaceutical ingredients business.
"This transaction delivers on our objective to supplement and boost our organic growth with strategic acquisitions. We will continue to seek opportunities to build our business and enhance shareholder value."
With the acquisition, Lannett will have access to KU's research and development and regulatory expertise, particularly in the areas of difficult-to-manufacture products and Paragraph IV certifications.
Under the deal, Lannett would receive KU's recently inspected 381,000ft² facility in Seymour, Indiana, which has substantial manufacturing and warehousing capacity, as well as dedicated product development space.
