Par Pharma to be acquired for $1.84B by TPG

July 16, 2012, 10:53 a.m. EDT By Drew FitzGeraldPar Pharmaceutical Cos. PRX -0.18%agreed to a takeover by private-equity firm TPG Capital for $1.84 billion in cash, yielding to pressure from a well-known activist fund that had pushed for its sale.The deal offers Par stockholders $50 for each share of the generic-drug maker, a premium of about 37% over Friday's closing price. The merger agreement allows Par to look for alternative proposals through Aug. 24.Shares surged 38% to $50.45 early Monday, suggesting some investors are hoping that the drug maker will receive another bid.A Par spokeswoman wasn't immediately available, while a spokesman for TPG declined to comment. The deal has been approved by Par's board and isn't subject to a financing condition.The private-equity deal comes after activist firm Relational Investors LLC began pressuring the company to sell itself, calling its stock undervalued despite recent operational improvements. Relational held talks with Par's management in April and November, according to a filing with the U.S. Securities and Exchange Commission.Relational has a 9.9% stake in Par, according to recent data from FactSet. A representative from the San Diego investment firm wasn't immediately available for comment.Par specializes in manufacturing high-barrier-to-entry generic drugs and niche pharmaceuticals. The company's profitable generic-drug operation has outpaced its branded-drug business.Last year, Par acquired specialty pharmaceutical company Anchen Pharmaceuticals, which focused on developing extended-release and niche generic products, for $410 million in cash. It also bought smaller generics company Edict Pharmaceuticals of India.Par's management has been making "all the right moves" by building up its generic operations and restructuring its branded drug business, said Kevin Kedra, analyst at Gabelli & Co. He added that the company's recent moves have made it an attractive target for a potential strategic buyer, but the size of the company could make it difficult to find a drug maker able to top TPG's bid.Analysts expect Par to generate about $1.09 billion of sales this year, up 18% from 2011. The deal unveiled Monday values the company at 12.7 times expected earnings.The stock last traded above the offer price in 2004 and traded under $10 at the market bottom in 2009. Through Friday's close, the stock is off 8% in the past three months. As of April 27, Par had about 36.7 million shares outstanding.