Bridgewater-based Amneal Pharmaceuticals Inc. said on Tuesday it will acquire more than half of the majority interest in AvKARE and its related affiliate doing business as R&S Northeast, for $340 million.
AvKARE is a private label provider of generic pharmaceuticals in the U.S. federal agency sector, primarily serving the Department of Defense and the Department of Veteran Affairs.
Under terms of the deal, an Amneal subsidiary will acquire 61.5% of Fountain Run, Kentucky-based AvKARE. The purchase will be financed through a $180 million loan, $75 million in balance sheet cash and a $44 million Seller Note.
“When we re-joined Amneal as co-CEOs in August, we outlined a vision for our long-term strategy,” Chirag Patel and Chintu Patel, Amneal co-founders and co-CEOs, said. “While we remain extremely focused on organic growth, we also recognized that M&A would be a key element of our growth story, and that we would pursue the right opportunities that strategically fit our business. And we articulated what we would look for: opportunities to complement our existing distribution network, provide us with defensible, durable revenue streams and, ultimately, earnings that are accretive to ours. The AvKARE transaction meets all of these criteria, and we are excited about the value we expect it will create for patients, shareholders and other stakeholders.”
Amneal said the deal will enhance its existing presence in the federal health care market.
“The addition of AvKARE and its differentiated platform provides a unique opportunity for Amneal to diversify our business and open growth opportunities in the large, complex and growing federal healthcare market,” they said. “Amneal is among the largest generic drug companies domiciled in the U.S., and prioritizing our American operations and customers remains a top priority. With AvKARE, we believe Amneal will be well-positioned to utilize our extensive U.S.-based manufacturing network to supply products to the federal healthcare market. We look forward to completing the AvKARE transaction and strengthening our focus on providing affordable medicines to patients.”
Once the deal has closed, AvKARE will operate as an independent subsidiary of Amneal.
The transaction is expected to close in early 2020.
“We are pleased to enter into this transaction with Amneal, a leading provider of affordable medicines to federal agencies and one of our long-term business partners,” Steve Shirley, CEO of R&S Northeast and executive vice president of AvKARE, said. “We look forward to working with our entire network of vendor partners, as well as our customers at both the VA and DoD, and will continue to identify new opportunities in which we can better serve government agencies. In addition, we will continue to retain a large ownership interest in AvKARE and manage operations with our existing leadership team as an independent subsidiary of Amneal. We look forward to continuing to utilize our expertise in supplying affordable generic pharmaceuticals to federal agencies through our diverse vendor portfolio, and could not be more passionate about entering the next chapter of our company’s growth.”
Shirley will continue to lead the business and will report to Chirag Patel.
SunTrust Robinson Humphrey is serving as financial advisor and Morgan, Lewis & Bockius LLP is serving as legal counsel to Amneal. Raymond James is serving as financial advisor and Frost Brown & Todd is serving as legal counsel to AvKARE.