Horizon Pharma Offers to Acquire Depomed in a $3 Billion Deal

DUBLIN, IRELAND — (Marketwired) — 07/07/15 — Horizon Pharma plc (NASDAQ: HZNP)

  • Transaction would generate significant revenue and operating synergies, tax savings and would also be immediately and substantially accretive to Horizon’s adjusted diluted earnings per share
  • Projected full-year pro forma combined 2015 net sales and adjusted EBITDA would be in excess of $950 million and $350 million, respectively, based on Depomed’s and Horizon’s existing guidance
  • Combined company would have 13 marketed medicines, nearly doubling Horizon’s current portfolio, with more than 700 sales representatives in Primary Care, Orphan and Specialty business units
  • Horizon’s proven commercial execution expected to enhance growth of entire portfolio, including Depomed’s NUCYNTA® franchise and Gralise®
  • Conference call scheduled for 8:30 a.m. ET today

Horizon Pharma plc (NASDAQ: HZNP), a biopharmaceutical company focused on improving patients’ lives by identifying, developing, acquiring and commercializing differentiated and accessible medicines that address unmet medical needs, today announced a proposal to acquire all outstanding shares of Depomed, Inc. for a per share consideration of $29.25 in an all-stock, tax-free exchange valued at approximately $3.0 billion. Horizon’s proposal represents a premium of 42 percent to the closing price of Depomed on July 6, 2015. The transaction, if consummated, would be immediately and substantially accretive to Horizon’s adjusted diluted earnings per share.

“The strategic and financial benefits of our proposal are highly compelling,” said Timothy P. Walbert, chairman, president and chief executive officer, Horizon Pharma plc. “Given the significant revenue and operating synergies, as well as considerable tax savings, we would create substantial long-term value for Depomed’s shareholders in addition to the immediate value realized through the proposed premium.

“Despite our repeated attempts beginning in March to engage Depomed’s management and board of directors in friendly and confidential discussions, Depomed’s management and board have refused to engage in discussions with us and rejected our proposal,” added Mr. Walbert. “We have elected to bring this proposal to the attention of Depomed’s shareholders, who we expect, given the opportunity to understand the financial, strategic and operational benefits of this transaction will support it and will encourage their Board and management to begin constructive discussions with us promptly with the goal of completing a negotiated transaction.”

The proposal is subject to the pre-condition of confirmatory due diligence. This pre-condition may be waived by Horizon Pharma plc at its discretion.

The full text of the letter delivered to Depomed, Inc. by Horizon Pharma plc on July 7, 2015, is included below.

At 8:30 a.m. ET today, the Company will host a live conference call and webcast to review today’s announcement.

Participant Toll-Free Dial-In Number: (888) 338-8373
Participant International Dial-In Number: (973) 872-3000
Conference ID: 80721033

The live webcast and a replay may be accessed by visiting Horizon’s website at http://ir.horizon-pharma.com. Please connect to the Company’s website at least 15 minutes prior to the live webcast to ensure adequate time for any software download that may be needed to access the webcast.

A replay of the conference call will be available approximately two hours after the call and accessible through one of the following telephone numbers, using the passcode below:

Replay U.S. Dial-In Number: (855) 859-2056
Replay International Dial-In Number: (404) 537-3406
Passcode: 80721033


July 7, 2015

Mr. James A. Schoeneck
President and Chief Executive Officer
Depomed, Inc.
7999 Gateway Blvd., Suite 300
Newark, CA 94560

Dear Jim,

Over the last several months, we have attempted to convince your board of directors and you that the combination of Horizon Pharma, Inc., a wholly owned subsidiary of Horizon Pharma plc, and Depomed, Inc. is strategically and financially compelling for our respective companies and shareholders. We firmly believe that a combination of Horizon and Depomed would yield significant revenue, operating and tax synergies; accelerated revenue and earnings growth and strong cash flow as well as create substantial immediate and long-term value for our respective stakeholders.

To demonstrate our commitment to the proposed transaction, we sent you a letter on May 27, 2015, offering an all-stock transaction in which Depomed shareholders would receive $29.25 in Horizon ordinary shares, a 40 percent premium to Depomed’s trading price at the time. Since sending the letter, we have repeatedly attempted to engage with your board and advisors as well as you, including sending a follow-up offer letter on June 12th, which reiterated our proposal and set out again the merits of the combination. Unfortunately, your board and you have rejected our proposal and refused to meet or to engage in any discussions with us. In light of the clear benefits that would result from a combination of Horizon and Depomed and the unwillingness of your board, your advisors or you to engage with us, we are compelled to make our proposal known to Depomed’s shareholders. We believe once Depomed shareholders review our proposal and understand the merits of the combination, they will support this proposed transaction. We are ready to engage with your management team and board to negotiate a mutually acceptable agreement to combine our two companies.

Strategic and Financial Benefits
The combination of Horizon and Depomed represents the next logical step in the evolution of our two companies.

Horizon is still in the early stages of implementing our highly successful growth strategy. Within the last two years, we have successfully completed four acquisitions, enabling us to rapidly grow net sales and adjusted EBITDA as well as significantly diversifying our business. Each of our acquisitions has been immediately and substantially accretive. These include our acquisitions of Hyperion Therapeutics, the U.S. rights to PENNSAID® 2%, Vidara Therapeutics, and the U.S. rights to VIMOVO®. In each of these, we have demonstrated an ability to continue delivering strong operating results across each of our business units while integrating these medicines and businesses into our Company, thereby creating compelling value for our shareholders.

The combined company would be significantly larger and more diversified than either company individually and positioned to realize substantial and sustainable future growth. Specifically:

  • We would immediately achieve enhanced critical mass. Based on Depomed’s and our guidance, we would project full-year pro forma 2015 net sales and adjusted EBITDA in excess of $950 million and $350 million, respectively, as well as more than 700 sales representatives and 13 marketed medicines for the combined entity.
  • We would benefit from meaningful sales and operating synergies, as well as opportunities to further penetrate more markets for the benefit of our customers and patients, yielding greater revenue and earnings growth potential.
  • Horizon’s leading presence in orphan disease, primary care and specialty markets are complementary to Depomed’s specialty products that treat pain and other central nervous system disorders. We are confident the proven execution of our commercial organization and our broad platform would drive increased adoption and even stronger performance of your newly acquired products NUCYNTA® ER and NUCYNTA® as well as your existing medicines Gralise®, CAMBIA®, Lazanda® and Zipsor®.
  • Further, the combination of our companies would provide additional financial flexibility and increased free cash flow for future M&A activity, enhanced access to the capital markets and considerably lower borrowing costs (as compared to Depomed’s current borrowing rates).

In consideration of the foregoing, and with the unanimous support of Horizon’s board of directors, we present the following merger proposal.

Financial Terms
Based upon our review of publicly available information, we propose to acquire 100 percent of Depomed’s issued and outstanding shares of common stock for a price of $29.25 per share in Horizon ordinary shares. The acquisition price reflects a premium of 40 percent to Depomed’s closing price as of the date of our first proposal on May 27th and a premium of 42 percent to Depomed’s closing price on July 6, 2015. It also represents a premium of 35 percent and 38 percent to Depomed’s volume weighted average price for the previous 30 and 60 days, respectively, and exceeds the all-time high at which Depomed’s stock has traded. An all-stock, tax-free transaction offers a compelling near-term value premium to Depomed shareholders and creates the potential for considerable long-term value for our combined shareholders.

Under our proposal, Depomed shareholders would own approximately 25 percent of the combined company.

We anticipate Depomed’s convertible notes due 2021 would remain outstanding and we would retire Depomed’s $575 million of senior secured notes bearing interest of 10.75 percent with a combination of our cash on hand and newly issued debt. Given our ability to use cash on hand and a new debt issuance with an expected interest rate less than one-half your current interest cost, the combined company would realize a considerable cost savings, further adding to the value proposition for your shareholders. Further, the shareholders of Depomed will benefit from Horizon’s substantially lower leverage and the enhanced cash flow generation of the combined company.

The transaction and financial terms we are proposing represent a compelling opportunity for our respective shareholders and would provide the ability to accelerate revenue and earnings growth, while delivering immediate and substantial accretion to the combined company. Depomed shareholders would benefit from the substantial premium we are offering while maintaining future upside associated with the operational synergies, diversification, growth and tax savings resulting from the transaction.

Transaction Process
We have engaged Citigroup Global Markets Inc. and Jefferies LLC as lead financial advisors. Given the work we have done to date, our remaining due diligence requirements are confirmatory and, with your cooperation, can be completed very rapidly. We are prepared to move expeditiously to reach agreement on transaction terms and we look forward to working with you to achieve a successful outcome. Our proposal is based on our review of publicly available information regarding Depomed and is subject to the completion of our due diligence review, the negotiation of mutually acceptable definitive transaction agreements containing customary closing conditions, the approval of our respective shareholders and the necessary regulatory approvals. We do not anticipate any issues in obtaining shareholder and regulatory approvals.

This letter does not create any binding obligation on the part of Horizon. No such obligation will exist until a mutually acceptable definitive agreement is executed.

This is truly a unique opportunity for our collective companies, shareholders, patients and stakeholders. Horizon is well positioned to deliver optimal value to Depomed’s shareholders. We again request to meet with Depomed’s management team and you to negotiate a mutually acceptable transaction. We look forward to working with Depomed on a successful combination of Horizon and Depomed.

Best regards,
Timothy P. Walbert
Chairman, President and Chief Executive Officer

Cc: Board of Directors, Depomed, Inc.


About Horizon Pharma plc
Horizon Pharma plc is a biopharmaceutical company focused on improving patients’ lives by identifying, developing, acquiring and commercializing differentiated and accessible medicines that address unmet medical needs. The Company markets seven medicines through its orphan, primary care and specialty business units. Horizon’s global headquarters are in Dublin, Ireland. For more information, please visit www.horizonpharma.com.

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