Generic drugmaker Mylan Inc (MYL.O) said it would buy the injectable drugs unit of Strides Arcolab Ltd (STAR.NS) for $1.6 billion to expand its presence in the fast-growing generic injectables market.
The deal for Agila Specialities, a wholly-owned subsidiary of Strides, caps months of uncertainty regarding its sale, with reports suggesting Pfizer Inc (PFE.N) and Japan's Otsuka Holdings Co Ltd as other potential buyers.
The deal will help Mylan, one of the world's largest generic drugmakers, double its injectable drugs portfolio.
A raft of patent expiries that will stretch until 2016 is expected to drive growth in the global generic injectables market. Also, many generic injectable drugs, which tend to be administered in hospitals, have been in short supply in the United States, including treatments for cancer.
"Together we will have more than 700 marketed injectables products and a global pipeline of more than 350 injectables products pending approval," Mylan President Rajiv Malik said.
Mylan said the acquisition of Bangalore-based Agila is expected to immediately add to its adjusted diluted earnings per share following closing.
"We expect the transaction to have a greater than 10 percent return on invested capital by the third full year from closing," CFO John Sheehan said in a conference call.
Mylan will also pay Strides Arcolab $250 million in potential milestone payments, it said.
Mylan said it will not assume any outstanding debt for the deal, which was unanimously approved by its board.
Separately, Mylan reported a 25 percent rise in fourth-quarter results profit, helped by sales of its Epipen auto-injector for the treatment of severe allergic reactions.
Mylan's shares were up 2 percent in extended trading after closing at $28.57 on Wednesday on the Nasdaq.
(Reporting By Adithya Venkatesan and Vrinda Manocha in Bangalore; Editing by Saumyadeb Chakrabarty)