June 17, 2009 (FinancialWire) — Watson Pharmaceuticals, Inc. (NYSE: WPI) said it has entered into a definitive agreement to acquire privately-held Arrow Group for $1.75 billion in cash and stock.

Arrow is a generic pharmaceutical firm that markets more than 100 molecules in over 20 different countries, including markets such as Canada, France and the U.K. The company said it also has a pipeline that will be launched across multiple markets, including potential U.S. launches in each of the next three years.

According to a statement by Watson, the combination of Watson and Arrow will result in a global pharmaceutical company with over $3 billion in revenue, commercial operations in over 20 countries, and “a robust product portfolio and pipeline.”

Watson said it expects the transaction to close in the second half of 2009, and be accretive to cash earnings per share in 2010 before synergies.

Under the terms of the agreement, the total consideration will include a cash payment of $1.05 billion, and the issuance of around 16.9 million shares of Watson common stock valued at $500 million, both paid at closing.

The remaining $200 million will be paid 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 its Lipitor drug.

Watson said it plans to fund the cash portion of the consideration by using available cash and additional borrowings. The company said it is evaluating options for longer term debt financing.

The boards of both Watson and Arrow have unanimously approved the deal.

Corona, California-based Watson Pharmaceuticals is engaged in the development and distribution of pharmaceuticals, with a portfolio of generic products and a specialized portfolio of branded pharmaceuticals focused on urology, gynecology and nephrology.

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