Drug maker Watson buys rival

LOS ANGELES -- Watson Pharmaceuticals Inc., which makes generic versions of Valium, Percocet, and other drugs, said yesterday it reached a deal to acquire rival Andrx Corp. for about $1.9 billion in cash.

If approved, the deal would create the nation's third-largest generic drug maker based on prescriptions dispensed, Watson said.

The agreement calls for Corona, Calif.-based Watson to pay $25 a share for Andrx, a 32 percent premium to the stock's average trading price over the last 30 days.

Shares of Andrx jumped $2.14, or 9.9 percent, to close at $23.73 on the Nasdaq Stock Market. Watson shares fell 55 cents, or 1.9 percent, to $29 on the New York Stock Exchange.

Andrx, based in Plantation, Fla., makes generic drugs and drug-delivery technologies and employs 1,700 people. The company had revenue of $1.15 billion in fiscal 2004.

''This transaction provides excellent value to our shareholders while also opening new business avenues for Andrx in terms of geography, product offerings, and technologies," Thomas P. Rice, Andrx's chief executive, said.

Watson said it will fund the deal with cash reserves, bank financing, and net of cash acquired from Andrx. The acquisition is expected to add to Watson's 2007 earnings, with estimated revenue next year of $2.8 billion, Watson said.

Analysts surveyed by Thomson Financial expect earnings per share of $1.56.

The boards of both companies have approved the transaction, which is expected to close in six months. Shareholders still need to approve the deal.

Watson said the deal would result in the reduction of selling, general, and administrative expenses. The company did not say whether it would cut jobs.