Teva to acquire Cephalon in $6.8 billion transaction

Teva Pharmaceutical Industries Ltd. (NASDAQ: TEVA) and Cephalon, Inc. (NASDAQ: CEPH) today announced that their Boards of Directors have unanimously approved a definitive agreement under which Teva will acquire all of the outstanding shares of Cephalon for $81.50 per share in cash, or a total enterprise value of approximately $6.8 billion. The transaction is not conditioned on financing and is expected to be completed in the third quarter of 2011.

The transaction reinforces Teva’s long term strategy of building out its branded and specialty pharmaceuticals business through diversification and expansion of the company’s product portfolio and pipeline. The combined company will utilize its complementary commercial, R&D and operational capabilities. It will capture value by providing customers with a broad spectrum of specialty branded products. The combined company’s sizable branded portfolio represents approximately $7 billion in sales, with a robust pipeline including more than 30 late-stage compounds. The transaction will create immediate and sustainable value in niche therapeutic areas including CNS, oncology, respiratory and pain management. The combined company will become a leader in specialty pharma.

“We are embarking today on a new and exciting future for Teva’s branded business, and we are delighted that we will be working together with the Cephalon team,” said Shlomo Yanai, President and Chief Executive Officer of Teva. “This is transforming for Teva’s branded business, as it will help us to deliver on our strategic goal of creating a diversified, multi-faceted company. We have been following Cephalon for a long time and are very happy with the opportunity to join forces. Our significantly broader portfolio will permit marketing and sales synergies and enhance profitability. We look forward to welcoming our colleagues at Cephalon to the Teva family.”

“Cephalon’s merger with Teva is the result of a rigorous process that included a review of a wide-range of strategic options undertaken by Cephalon’s Board of Directors and management team to maximize value and deliver significant returns to shareholders,” said Kevin Buchi, Chief Executive Officer of Cephalon. “By joining forces with Teva, we will benefit from their scale, worldwide reach and operational excellence, allowing us to further pursue our shared goals of delivering new, innovative therapies to help patients around the world. Teva shares our strong commitment to R&D, and we believe our pipeline will thrive under their leadership. We look forward to working with the Teva team to ensure a smooth transition and complete the transaction as expeditiously as possible.”

Price and Premiums

The purchase price of $81.50 per share represents a 39% premium to Cephalon’s stock price on March 29, 2011, the last closing price before the unsolicited proposal was announced; a premium of 44% to Cephalon’s average closing stock price over the last 30 trading days prior to the unsolicited proposal; a 12% premium to the unsolicited proposal of $73.00 per share; and a premium of 6% to Cephalon’s closing stock price on April 29, 2011, the last trading day prior to today’s announcement. The transaction is expected to be immediately accretive to Teva’s non-GAAP earnings per share and accretive to Teva’s GAAP earnings within the fourth quarter of closing.

Strategic and Financial Benefits of the Transaction

• Diversifies Teva’s Branded Portfolio and Provides Access to New Therapeutic Segments: Together Teva and Cephalon will offer broad market appeal across the pharma spectrum with products that are highly complementary. As a result of the transaction, Teva will expand and diversify its marketed products in CNS, and will add commercial presence in oncology and pain management. The combined company will have more than 20 branded products, with pro forma branded sales of approximately $7 billion.
• Provides Attractive and Highly Complementary Pipeline with Significant Value: Cephalon’s attractive pipeline of late-stage products enhances Teva’s pipeline in key therapeutic areas including CNS, oncology, and respiratory, and expands into new areas such as pain management. The combined company will have more than 30 compounds in late-stage development, including three products in filing stage. The pipeline has a long patent life and is well positioned for future growth and success.
• Enhances Branded Commercial and R&D Capabilities: Teva will benefit from Cephalon’s brand expertise, infrastructure and talent in specialty pharma. Teva and Cephalon share complementary commercial and R&D capabilities, with proven teams of talented employees with experience in bringing products to market.
• Delivers Significant Synergies: By taking advantage of the best of both companies, Teva expects to realize annual cost synergies of at least $500 million in year three following the transaction’s close.
• Accretive to Earnings: The transaction is expected to be immediately accretive to Teva’s non-GAAP earnings per share and accretive to Teva’s GAAP earnings within the fourth quarter of closing.
• Enhances Global Generic Footprint: With Mepha, Teva will benefit from the #1 generics company in Switzerland with a geographic presence in CEE, Africa and Latin America. Mepha provides Teva with a presence in high growth emerging markets.
• Reinforces Teva’s Long Term Strategy: The transaction reinforces Teva’s long term strategy to drive increased diversification across business units, products and geographies. The combined company’s broad product portfolio is expected to support Teva in achieving its stated goal of growing its branded revenues from $4.6 billion in 2010 to over $9 billion in 2015.

Financing and Approvals

The transaction has no financing condition. Teva intends to finance the transaction through cash on hand, lines of credit and the public debt market.

The transaction is subject to the satisfaction of customary closing conditions, including expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act and clearance by the European Commission under the EC Merger Regulation, as well as the approval of Cephalon stockholders. The transaction is expected to be completed in the third quarter of 2011.

Advisors

Credit Suisse Securities (USA) LLC is serving as Teva’s financial advisor, and Kirkland & Ellis LLP is serving as its legal counsel. Deutsche Bank Securities Inc. and BofA Merrill Lynch are serving as Cephalon’s financial advisors, and Skadden, Arps, Slate, Meagher & Flom LLP is serving as its legal counsel.