Rumors are swirling in the Israeli press, that the world’s largest generic drug maker is about to become much larger. Reports are that the Israeli based Teva Pharmaceuticals (TEVA) is in talks to buy US Generic maker Barr Pharmaceuticals (BRL) for as much as $7.5 billion, a 40% premium to their closing price yesterday. While Barr comes with a fat price tag, the deal would make sense for Teva, as Barr is very active in Central and Eastern Europe, geographies that Teva has been targeting at for future growth.
Teva has around $3 billion in the bank so it appears they are going to have to go out and issue debt to fund the deal. The debt plus the big premium, may pressure the stock price in the short term, but over the long haul, this may prove to be another in a long line of very wise acquisitions.
The deal also brings some pride to the Israeli business community is this would be the biggest M&A in Israeli history. The fact that an Israeli company has the potential to do such a large acquisition is a testament to the ingenuity and steadfastness of the local economy.
Aaron Katsman, IsraelNewsletter.com
Disclosure: Author’s fund has a position in TEVA as of 7/17/08.
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Aaron Katsman is Managing Editor of the Israel Opportunity Investor newsletter. He is lead portfolio manager for the Israel Growth Portfolio and Managing Director of America Israel Investment Associates, LLC. For more information, go to www.israelnewsletter.com or call 1-888-327-6179, or email aaron@profile-financial.com.
The entire interview with Cliff Goldstein of AMIDEX is part of our new subscription newsletter, Israel Opportunity Investor. You can find out more about the product and the opportunities we cover at www.israelnewsletter.com.
Can you tell us how AMIDEX got started?
Cliff Goldstein: I’m a lawyer by trade. In 1998 I saw some really compelling advances being made by Israeli technology companies. I decided to go to brokerage firms to see if I could find a way to invest in this ingenuity. I was specifically looking for a mutual fund that invested in Israeli companies. There wasn’t anything out there. After speaking directly to brokers, it was also clear to me that brokers themselves weren’t really knowledgeable about what was occurring on the ground in Israel. I then went to Israeli Economic Mission to the U.S. to complain about the lack of retail investment opportunities.
Why aren’t there Israeli investment products in the U.S.?
CG: I think part of the problem was that there was no benchmark for those Israeli companies trading in the U.S. There is really no comprehensive index because a significant portion of Israeli marketcap trades in the U.S. and in Tel Aviv. There were indices for the Tel Aviv Stock Exchange (TASE) but not one that included New York as well.We decided in 1999 that we could address this barrier and create our own index that included both U.S. and Tel Aviv listed Israeli companies. As this was a time before Exchange Traded Funds (ETFs) had really developed, we borrowed from the protocols developed by the WEB products. We created an index that included 60% of total Israeli marketcap. To get here, we needed 35 companies to get 60% of the total universe. Most of the companies in the initial index were Israeli companies that traded in the U.S. Given what’s transpired over the past couple of years in the U.S. and the growth of Israeli businesses, we now see the inverse: about 60% of our firms trade in Tel Aviv and the minority in the U.S. It was these 35 companies that comprised the original AMIDEX35. We could then back test historically and when speaking to investors, this really looked good from a performance point of view. When we launched the actual fund in June of 1999, 68% of the companies traded in the U.S. and the remainder in Israel. We thought that the volatility and risk of political disruption would be highest in Israel so we were comfortable with this mix. It’s interesting to think that soon after we had the meltdown of the dot com boom. (Continue »)
