Actavis Plc To Buy Forest Labs For $25 Billion; Deal Expected To Be Announced Tuesday

Actavis PLC (NYSE:ACT) is in advanced talks to buy out competing drug maker Forest Labs (NYSE:FRX) in a whopping $25 billion deal expected to be announced early Tuesday, according to media reports.

The acquisition of New York-based Forest Labs, which had a market capitalization of $19.3 billion as of Friday, would add a range of generic drugs including Alzheimer’s drug,Namenda, and blood-pressure pill, Bystolic, to Actavis’ product line-up. On Feb. 14, Actavis had a market value of $33.4 billion.

Dublin-based Actavis has made deals worth $14.4 billion over the last three years and reportedly uses the mergers and acquisitions route to grow inorganically, a Bloomberg report said, citing Ori Hershkovitz, a partner at Sphera Funds Management Ltd in Tel Aviv.

“They have promised the market that they would do a large amount of deals to keep the accretion alive. If you can’t do a large amount of R&D, there’s only one way to grow and that’s through M&A,” Hershkovitz said, according to Bloomberg.

The transaction has not been confirmed by either company but the speculated $25 billion deal value is more than seven times Forest Labs' estimated sales for 2014, according to Bloomberg.

In October, the company bought New Jersey-based Warner Chilcott Plc. for $9.2 billion to expand into the women's health segment.

Forest Labs' stock, which closed 1.49 percent up on Friday was trading 23.27 percent up in pre-market trading Tuesday.