Endo Health plans to repay some debt, repurchase convertibles

By Sara Rosenberg

New York, Nov. 5 - Endo Health Solutions Inc. has received a financing commitment in connection with its planned acquisition of Paladin Labs Inc., company officials said in a conference call on Tuesday.

Deutsche Bank Securities Inc. and RBC Capital Markets are the lead banks on the financing.

Proceeds from the financing will be used to repay some of the company's existing debt and fund the early repurchase of its convertible notes due April 2015.

Officials remarked that the transaction will create a change of control under its credit facility, so its term loan A and term loan B will need to be refinanced.

In addition, the company will secure some committed financing for its senior notes in the event they are put - however, based on current market conditions, officials don't think that's likely - and some additional debt is being taken on to fund the convertibles redemption.

Net debt to adjusted EBITDA will be 2.4 times, with the company expecting to be able to rapidly deleverage.

Under the agreement, each of Endo and Paladin will be acquired by a newly formed Irish holding company, New Endo.

Paladin shareholders will receive 1.6331 shares of New Endo stock and C$1.16 in cash, for a value of C$77.00 per share. The stock-and-cash transaction is valued at about $1.6 billion, of which around 98% will be paid in shares of stock.

Current Endo shareholders will receive one share of New Endo for each share of Endo they own at closing.

At closing, current Endo shareholders will own around 77.5% of New Endo, and current Paladin shareholders will own about 22.5% of New Endo.

Closing is expected in the first half of 2014, subject to regulatory approvals in the United States, Canada and South Africa, the approval of both companies' shareholders, the approval of the Superior Court of Quebec, the registration and listing of New Endo shares and customary conditions.

Endo is a Malvern, Pa.-based specialty health-care company. Paladin is a Montreal-based specialty pharmaceutical company.

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