Mallinckrodt and Endo are on the brink of a transformative merger involving a cash-and-stock deal valued at an impressive $6.7 billion. In this strategic move, the pharmaceutical titan Mallinckrodt will be listing shares of the new entity on the prestigious New York Stock Exchange, marking a significant milestone in the pharmaceutical industry. In this arrangement, shareholders of Endo, known for producing sterile injectables and a range of generic pharmaceuticals, will receive $80 million in cash alongside nearly a 50% stake in the newly formed company on a pro forma basis.
In contrast, investors in Dublin-based Mallinckrodt will command a slightly larger 50.1% interest, providing a strong foothold in the newly consolidated organization. This merger isn’t just a financial maneuver; it demonstrates indomitable ambition, requiring the green light from shareholders and regulators alike to proceed. "This exciting combination will create a larger and more diversified entity with the scale and resources needed to unlock the full potential of both companies," proclaimed Mallinckrodt’s Chief Executive Siggi Olafsson in a statement shared on Thursday.
The anticipated merger promises a robust pro forma balance sheet augmented with compelling synergy opportunities, offering increased flexibility to invest in innovation and seize growth chances in an ever-evolving pharma landscape. The merged firm is projected to generate substantial revenues, with an impressive $3.6 billion in pro forma revenue expected by 2025, alongside approximately $1.2 billion in pro forma adjusted earnings before interest, taxes, depreciation, and amortization as outlined by both Mallinckrodt and Endo. It's important to note that both companies have faced tumultuous times, having filed for Chapter 11 bankruptcy in recent years as debts soared and legal challenges tied to opioid-related issues escalated.
Nevertheless, through this merger, the existing senior secured term loans and notes of Mallinckrodt will undergo necessary refinancing, while Endo's debt situation will remain intact. Olafsson is set to lead the new firm headquartered in Dublin, while Paul Efron, an Endo board member, will assume the position of chair.
Additionally, a spinoff involving Endo's sterile injectables and the generics business from both companies is under contemplation. Scott Hirsch, the interim CEO of Endo, remarked on the merger's potential, stating, "The combined company will be equipped with a branded business that possesses the scale, cash flow, and balance sheet strength necessary to invest in both internal and external growth opportunities, including pursuing commercial-stage assets." The synergy from the integrated sterile injectables and generics business is expected to produce stable and robust free cash flow, allowing for consistent capital returns to shareholders following the anticipated separation..