Bernstein Research believes that Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA) may be interested in making another acquisition following its takeover of German generic drug company Ratiopharm GmbH in March.
Bernstein Research analyst Dr. Ronny Gal noted the $2.5 billion that Teva raised in a bond offering last week, which will be used toward the $5 billion price tag of Ratiopharm. Teva also use the proceeds to pay off its credit line taken in the wake of its acquisition of Barr Pharmaceuticals Inc. in 2008.
Gal says that Teva has in the past spoken about plans to pay for the Ratiopharm acquisition with cash flow from operations. He therefore believes that the bond issue implies that Teva will close the Ratiopharm earlier than planned; that is before the end of 2010. He says that another possibility is that Teva is considering another acquisition of $1-3 billion, in the near term.
Gal says that the interest rate that Teva obtained in the bond issue was very low. The bonds bear variable LIBOR rate plus 0.4% for debt maturing in December 2011; 1.5% fixed interest for debt maturing in June 2012, and 3% fixed interest for debt maturing in June 2015. "As long as Teva can raise debt at these interest rates, it should be an aggressive acquirer," he said.
Published by Globes [online], Israel business news - www.globes-online.com - on June 22, 2010
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