Watson Pharmaceuticals (NYSE: WPI) Buys Arrow Group for $1.75B

Watson Pharmaceuticals Inc. (NYSE: WPI) purchased generic drug maker Arrow Group for $1.75 billion in cash and stock on Wednesday.

Watson Pharmaceuticals said the combined company will have about $3 billion in annual revenue and its business will span more than 20 countries. The company expects the transaction to close later this year, pending review by regulators, and add to its profit in 2010.

Arrow Group, a privately-held company, has become one of the fastest growing generic drug companies in the U.S., with $647 million in sales in 2008. Arrow owns the U.S. rights to the authorized generic version of Pfizer Inc.'s cholesterol drug Lipitor, which is the best-selling brand-name drug in the world. The generic is expected to reach the market in November 2011.

Arrow also sells a generic version of the blood pressure drug Altace, or ramipril, according to Associated Press. It is also one of the companies challenging the patent on AstraZeneca PLC's asthma drug Pulmicort, and has the right to start selling a generic version of Sepracor Inc.'s respiratory drug Xopenex starting in August 2012.

Watson reported $2.54 billion in revenue last year, and expects about $2.65 billion this year. The world's largest generic drugmaker, Teva Pharmaceutical Industries Ltd., reported $11.09 billion in revenue in 2008.

The deal includes $1.05 billion in cash and $500 million in stock, or 16.9 million shares worth roughly $29.51 each, along with $200 million in preferred stock. The boards of both companies approved the deal. Arrow shareholders may receive additional payments based on sales of generic Lipitor.

Arrow has about 1,000 employees, including about 250 working in research and development, and Watson expects to keep most of the Arrow workers. The company does business as Arrow Generics in the U.K., Cobalt Pharmaceuticals in the U.S. and Canada, and Arrow Generiques in France. It owns production facilities in Brazil, Canada, and Malta, and has a research and development facility in Australia.

Watson’s stock price went up $1.44 in afternoon trading to $30.28.

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