Watson to buy Arrow; Trump makes bid for Trump Entertainment casinos; Broadcom offer expires

By Stephanie N. Rotondo

Portland, Ore., June 17 - Watson Pharmaceuticals Inc. aims to expand its global position as a leader in generic drugs with its acquisition of Arrow Group, the company said Wednesday.

The $1.75 billion deal was announced early in the session, and during a conference call to discus the merger, Watson's management said the transaction would serve to fulfill the company's three business strategies, giving the company a global foothold at a financially attractive price. The deal will also "enhance our long-term growth prospects."

Meanwhile, real estate heavyweight Donald Trump has reportedly made yet another offer for the Atlantic City resorts that carry his name. Trump previously made a rejected bid for Trump Entertainment Resorts Inc. before it filed for bankruptcy.

Broadcom Corp.'s tender offer for Emulex Corp.'s equity expired late Wednesday night. Though the tender was not expected to be successful, many have opined that either the offer would be once again extended or perhaps Broadcom would sweeten the pot.

In the broader market, equities ended mixed. The Dow Jones Industrial Average fell 5.90 points, or 0.07%, to 8,499.38, and the Standard & Poor's 500 index ended 1.11 points, or 0.12%, softer at 910.86. The Nasdaq Composite, however, closed 12 points, or 0.67%, higher at 1,808.18.

Watson to acquire Arrow

Watson Pharmaceuticals announced that it will acquire the privately held Arrow Group in a $1.75 billion cash-and-stock offer.

According to the deal's terms, Watson will pay $1.05 billion in cash and issue approximately 16.9 million new Watson shares for about $500 million. The remaining $200 million will come in the form of zero-coupon preferred stock redeemable three years after closing of the transaction.

"Arrow shareholders will also receive additional contingent payments based on sales of the authorized generic version of Lipitor (atorvastatin)," according to a press release.

Watson will use its available cash and additional borrowings to fund the transaction.

"The acquisition of Arrow will mark a significant milestone in realizing our strategic vision to expand our global footprint and leverage our assets across many developed and emerging markets around the world," said Paul Bisaro, president and chief executive officer of Watson, in the press release.

"The combined company will have a global infrastructure and a strong product portfolio and pipeline which create significant opportunities for long term growth. Additionally, Arrow's manufacturing network, including facilities in Canada, Malta and Brazil, will further expand Watson's global supply chain."

Bisaro said in a conference call to discuss the merger that several "key executives" were expected to remain on board, including Tony Tabatznik, founder and CEO of Arrow. Tabatznik will join the company's board of directors as a non-employee director.

The deal is expected to close in the second half of 2009 and is also expected to be accretive to cash earnings in 2010 before synergies.

Watson's stock rose $1.38, or 4.79%, to $30.22 on Wednesday. The company is based in Morristown, N.J.

Trump makes bid

Donald Trump has reportedly submitted a bid for the Atlantic City hotels of Trump Entertainment, which are currently operating under Chapter 11 protections.

The terms of the deal have not yet been disclosed because the deal has yet to be submitted to the court overseeing the casino operator's case.

Trump Entertainment filed for bankruptcy on Feb. 17 after struggling under a hefty $1.7 billion load of debt. Trump had made an offer at that time for the company, which was rejected by bondholders. As a result, Trump severed his ties to the company.

On June 2, Trump Entertainment said a sales agreement with Coastal Marina LLC fell through due to timing.

Trump Entertainment has until Aug. 3 under its exclusivity period to file its own plan of reorganization. News reports have indicated that the company will make a decision on Trump's bid - as well as a second bid made for the company by an outside party - before that date.

Trump Entertainment's equity ended unchanged at $0.19.

Broadcom offer nears expiration

Broadcom's tender offer for Emulex's stock was set to expire as Wednesday's clock ticked down. The offer deadline was scheduled for 11:59 p.m. ET.

Based on results from the first tender deadline - the offer was originally set to expire June 3 - analysts told Prospect News that less than 5 million shares are expected to be tendered, much less than was required under the offer.

Still, the market is expecting that Broadcom will either once again push the tender date back or possibly make a higher offer than its current $9.25-per-share proposal.

Emulex has called the offer "grossly inadequate" and has also been uncooperative in providing non-public information to the company. Broadcom has indicated it would raise its bid if non-public information was made available.

Broadcom did not return calls seeking comment.

Broadcom's shares gained 57 cents, or 2.24%, to $25.99. The Irvine, Calif.-based company provides semiconductors for wired and wireless communications.

Shares of Emulex, a Costa Mesa, Calif., storage networking company, fell 9 cents, or 0.84%, to $10.64.

Mentioned in this article

Broadcom Corp. Nasdaq: BRCM

Emulex Corp. NYSE: ELX

Trump Entertainment Resorts Inc. Pink Sheets: TRMPQ

Watson Pharmaceuticals Inc. NYSE: WPI

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