March 2, 2021

DealBook: Mylan Buys Drug Maker of Generic Injectables

The drug maker Mylan announced on Wednesday that it was acquiring Agila Specialties Private, an Indian manufacturer of generic injectable drugs, for $1.6 billion in cash.

The move would double Mylan’s presence in the injectable-drug market, a fast-growing segment of the generic drug industry that has been troubled by major quality and supply problems in recent years.

Mylan’s chief executive, Heather Bresch, said in a telephone interview that the acquisition, expected to be completed in the fourth quarter, would help expand the company’s presence in emerging overseas markets and establish it as a major player in the injectables market. Mylan expects the injectables market to grow by 13 percent a year through 2017.

Despite this growth, however, most major manufacturers of injectable drugs have suffered from serious supply and quality problems in recent years, leading to recalls and a nationwide shortage of critical products like chemotherapy drugs.

Ms. Bresch said Mylan’s recognizable brand — it is one of the world’s largest makers of generic drugs — would set it apart from its competitors.

“Our ability to bring real quality leadership in this space is our real opportunity,” she said.

In the past, the injectable business was so competitive that companies drove prices too low, said Rajiv Malik, Mylan’s president. But now that several large manufacturers — including Hospira, Sandoz and Teva — have invested millions of dollars in upgrading their plants, that picture has changed.

“I think they won’t be chasing the floor anymore anytime soon,” he said.

Mylan is acquiring Agila from the Indian pharmaceutical company Strides Arcolab.

Agila, which is based in Bangalore, sells more than 300 products worldwide, including 61 drugs in the United States. It has nine manufacturing facilities in India, Poland and Brazil, and Mylan says the company has a strong presence in emerging markets like Brazil.

Mylan, based near Pittsburgh, Pa., said it had received a commitment letter from Morgan Stanley for a $1 billion senior unsecured bridge term loan, which would be used in combination with the company’s existing cash and other lines of credit to pay for the acquisition.

Morgan Stanley is serving as financial adviser to Mylan, and Skadden, Arps, Slate, Meagher Flom is the legal adviser, assisted by Slaughter and May and Platinum Partners.

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Stocks and Bonds: Rising Markets Push Toward a Positive Year-End

Stocks rose on Thursday, putting the Standard Poor’s 500-stock index on the cusp of finishing out the year higher as another decline in jobless claims pointed to further improvement in the labor market.

With the benchmark index near break-even year-to-date and the Dow Jones industrial average already higher for 2011, stocks in the United States appeared on track to outperform such major overseas markets as China, Brazil and Europe, all of which are down more than 10 percent year-to-date.

The latest bit of optimism on Wall Street came from a drop in weekly claims for jobless benefits to a three-and-a-half-year low. Also helping equities, consumer sentiment improved in December, hitting its highest level in six months as Americans felt better about the economy’s prospects.

“This is supportive of the fact that the economy is gaining momentum and that the fourth quarter will be much better than people were expecting even just a month ago,” said James McDonald, chief investment strategist at Northern Trust Global Investments in Chicago.

The Dow Jones industrial average was up 61.91 points, or 0.51 percent, at 12,169.65. The S. P. 500 index was up 10.28 points, or 0.83 percent, at 1,254. The Nasdaq composite index was up 21.48 points, or 0.83 percent, at 2,599.45.

The Treasury’s 10-year note rose 5/32, to 100 14/32. The yield fell to 1.95 percent, from 1.97 percent late Wednesday.

Cyclicals, which have come under pressure recently from uncertainties over global growth, were the day’s top gainers, with financials gaining 2.1 percent, followed by energy up 1.1 percent and materials, up 0.9 percent.

Consumer staples, considered a defensive play, was the weakest sector, falling 0.2 percent.

Banks were among the top performers in European and American equity markets. Traders said the European Central Bank’s cheap loans to lenders would help ease their funding strains.

The S. P. financial sector added 2.05 percent.

Analysts said the European Central Bank’s first-ever tender of ultra-cheap three-year loans Wednesday was not giving much support to the euro. Doubts remained over how much of the funds will be lent to help the ailing euro zone economy or used to buy sovereign debt of struggling economies as banks deleverage and cut back exposure to government bonds.

“European leaders are not fixing the crisis and they are not doing the things necessary to fix it,” said Paul Dietrich, chief executive and co-chief investment officer at Foxhall Capital Management in Orange, Conn. “They talk, but they’re not backing up the talk with anything like what we did in the United States. And it’s not the sovereigns that is causing this crisis, but the banks themselves.”

The euro edged up less than 0.1 percent to $1.3051, off the session peak of $1.3119, according to Reuters data. It remains within a cent of a one-month low hit last week.

Investors warned that a year-end rally would not necessarily translate into elevated expectations for 2012 because many of the issues that hit the market this year, like slow growth and Europe’s debt crisis, remained unresolved.

“Next year will be a tug of war between better economic data here and the prospects for emerging market growth to pick up on one hand, with the European debt crisis on the other side of the rope,” Mr. McDonald said.

The CBOE Volatility index, a gauge of investor fear, fell 1.26 percent and is down about 13 percent so far this week, putting it on track for four weeks of declines.

Lower volume ahead of the Christmas and New Year’s Day holidays has left the market susceptible to heightened volatility this week.

Micron Technology jumped 15.7 percent to $6.41 as investors looked past limp quarterly results announced late Wednesday and focused on a potential 2012 rebound in long-stagnant memory chip demand and prices.

Tibco Software, the business software maker, climbed 8 percent to $23.76 after it forecast first-quarter revenue above estimates and said fourth-quarter profit and revenue soared.

American Greetings slumped 21.1 percent to $13.39 after third-quarter profit dropped nearly 40 percent and it warned of higher expenses in 2012.

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Hiccups in BlackBerry Service Continue

The widespread problems added to the woes of Research in Motion, the Canadian company that makes the phones. It is struggling with slowing sales and a tablet that has been a dud. Its shares were approaching a five-year low.

On Tuesday, RIM said a crucial link in its infrastructure had failed, and a backup didn’t work either. It said it was now working to get through a backlog of traffic.

“The resolution of this service issue is our Number One priority right now and we are working night and day to restore all BlackBerry services to normal levels,” the company said Wednesday.

Unlike other cellphone makers, RIM servers handle e-mail and messaging traffic to and from its phones. When the company encounters a problem, millions of subscribers can be affected at once. There are about 70 million BlackBerry users around the world.

BlackBerrys first caught on among professionals in the United States and Canada, but in recent years, growth has been driven entirely by overseas markets. In RIM’s most recent quarter, two-thirds of BlackBerrys were sold to people outside North America.

One of the big attractions of the BlackBerry for overseas users is BlackBerry Messenger, or BBM, which works like text messaging but doesn’t incur extra fees. That service was affected by the outage.

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Australia Suspends Live Cattle Exports to Indonesia

CANBERRA — Australia said Wednesday that it was suspending cattle exports to Indonesia, its top market, after an outcry over video footage showing inhumane treatment of cattle there.

Animal rights groups also called for an outright ban on the trade to other countries.

The minority Labor government has been under pressure to halt the 320 million Australian dollar, or $342 million, live cattle business with Indonesia after television footage showed cattle being beaten, whipped and maimed prior to slaughter in some Indonesian abattoirs.

Canberra will impose a six-month initial suspension on shipments to Indonesia, and the government will also review the live export trade to all overseas markets, including the Middle East, the Australian agriculture minister, Joe Ludwig, said.

“A sustainable live cattle export industry must be built on the ability to safeguard the welfare of the animals. The trade to Indonesia will only recommence when we are certain industry is able to comply with that,” he said.

Lyn White, who shot the graphic footage and is the campaign director for Animals Australia, said that the suspension should have come sooner and that the industry had been aware of problems in Indonesia for years.

“There has been an extraordinary outpouring of rage that our cattle have been treated like this and have been supplied for such treatment. So this is a first step,” Ms. White said in an Australian television interview.

Australia exports about 500,000 head of cattle a year to Indonesia, representing 60 percent of its live cattle trade. The country’s main competitor in the global livestock trade is Brazil.

Australia’s livestock trade to all countries is valued at 730 million dollars, with sheep exported to Kuwait, Jordan, Bahrain, Oman, United Arab Emirates, Qatar and Israel, and cattle shipped to Indonesia, Malaysia, Philippines, Jordan, Japan and Brunei.

Adam Bandt, a Green Party lawmaker who provides a critical one-seat buffer for Prime Minister Julia Gillard’s governing Labor Party, said he would bring legislation to Parliament to stop all live exports immediately, to both Asia and the Middle East.

“There can be no halfway house on this issue. I think we have a real opportunity in the next few weeks to end what is an inhumane and unethical practice,” Mr. Bandt said.

Indonesia’s deputy Agriculture minister, Bayu Krisnamurthi, said Jakarta had not been formally told of the ban, but it would spark intensive talks between the two Group of 20 members, who for years have been trying to reach an agreement on a free-trade pact.

“Indonesia has communicated intensively with Australia and will continue to do so. We have agreed to keep trying to seek the best solution to all parties involved,” he said.

Indonesia and Australia had two-way trade in merchandise and services worth 11.3 billion dollars in 2009, and two-way investment worth around 4.5 billion dollars in 2008.

Australia’s cattle industry put forward a plan on Monday aimed at reducing the suffering of animals sent to Indonesia and said the sudden suspension would cause “huge dislocation” to the cattle industry in northern Australia.

The industry group Meat Livestock Australia said under its plan, cattle would only be supplied to 25 accredited Indonesian slaughter houses currently meeting World Organization for Animal Health standards.

The conservative opposition in Parliament, which has strong support from farmers, said the suspension was a blunt instrument that would hit all Indonesian abattoir workers, as well as risk trade and security retaliation from Indonesia.

“We’ve made a statement also about our nearest neighbor Indonesia, who we are totally reliant on for other things like border control,” said Barnaby Joyce, the National Party’s Senate leader. “I don’t think we have thought through the ramifications.”

The previous conservative government under Prime Minister John Howard banned live cattle and sheep exports to Saudi Arabia between 1991 and 2000 after hundreds of animals died from heat stress en route to the Persian Gulf.

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DealBook: Diamond Foods and Pringles to Merge

Diamond Foods announced on Tuesday that it would merge with Pringles, a unit of Procter Gamble, in a deal valued at $2.35 billion.

The combination of the two business would create a company with roughly $2.4 billion in annual revenue and earnings of up to $410 million. The deal is expected to increase profit in the first fiscal year, excluding costs associated with the transaction.

“Pringles is an iconic, billion-dollar snack brand with significant global manufacturing and supply chain infrastructure,” Michael J. Mendes, chief executive of Diamond Foods, said in a statement. “This strategic combination will create an independent, global leader in the snack industry with a focus on quality and innovative products.”

The newly combined company will have a portfolio of top snack brands, including Emerald nuts, Pop Secret popcorn and Kettle potato chips. The deal will triple Diamond’s snack business, giving it more influence in grocery stores. The transactions will also give Diamond a bigger presence in fast-growing overseas markets. After the deal closes, international countries will account for 49 percent of the company’s total revenues.

Diamond has been on an acquisition binge in recent years, as it looks to gain size and scale. In 2008, it bought Pop Secret, increasing market share in the brand since then by 3.5 percentage points.

Two years later, Diamond picked up Kettle brand potato chips, whose sales have grown in the double digits. Overall, the company said revenue had doubled in the past five years, with earnings increasing at a faster pace.

The $2.35 billion transaction includes $1.5 billion of Diamond stock and the assumption of $850 million of Pringles debt. Diamond’s shareholders would own roughly 43 percent of the combined company. One-time transaction costs will amount to about $100 million over the next couple of years.

Morgan Stanley and law firm of Jones Day advised P.G. Bank of America-Merrill Lynch and the law firm of Fenwick West advised Diamond.

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