Today (March 18) Teva Pharmaceutical Industries (TEVA) announced an agreement to buy Germany’s Ratiopharm for $5 billion in cash. Privately-owned Ratiopharm is Germany’s second largest maker of generic medicines—and the sixth largest generic drug company in the world. The deal, in which Israel-based Teva beat out Pfizer (PFE) and Actavis Group, will advance Teva from No. 5 to No. 2 in the German market for generic drugs. The German market is the second-largest market for generics in the world next to the United States.
Teva has a good record with acquisitions with actual cost-savings usually exceeding those projected at the time of the deal.
The deal meets Teva’s criteria that any acquisition add to earnings within the first 12 months. In this case the company projects $400 million in cost savings within the first three years and accretion to earnings within nine-months.
A by no means insignificant benefit of the deal is that it keeps Ratiopharm out of the hands of competitors such as Pfizer.
As of March 18 I’m upping my target price on Teva Pharmaceutical to $66 by October from the earlier target of $61 by that month.
Full disclosure: I do not own shares of any company mentioned in this post in my personal portfolio.
I don’t know how significant ‘keeping Ratiopharm out of competitor’s hands’ may be, but I do believe that no matter how many other companies TEVA has successfully integrated, the prospects for integrating this company clouds their future and should lead to a stalling or drop in stock price during the next 3 to 4 months. I hear they got a better price than some other pharma buys of the last few years, so hopefully it’s a plus longer term.
Jim – thanks for the update.
Hey Jim,
Like southof 8 and off the TEVA topic, nat gas and the dividend income portfolio, any update on OKS in regards to how it looks going forward. It has a great div. and yield. Thanks.
This is one stock I kick myself for not adding more shares in my portfolio. Has performed well since my purchase in April 09.
Jim,
Your November call for soft Nat gas prices in 2010 sure was prescient. It’s been awhile since you’ve written about the nat gas industry. Any updates coming, particularly in light of today’s government draw down report?
From those of us who believe in your longterm thesis on this commodity, we’d sure appreciate your current thoughts.
I would happliy take a 6% gain over that time period.
I am long TEVA and would agree that this is a long term hold stock and will not tend to give you a quick bump. I wish I had bought more last year, but will be a buyer next time it drops, unless something fundamental changes. I am up 125% so you can do well if you are patient and buy on the dip.
TEVA seems more like a long term hold to me since it has had a very steady march upwards in price. I agree that a six percent increase is not that much over the next 7 months though.
Jim, given that Teva is currently over $62. Does it make sense to continue to hold this stock until October for the addt’l. 6% gain. Or are there better investments with a more dramatic upside?