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InvestorGuide Stock Analysis

Watson Buys Arrow Group for $1.75 Billion
Excerpt from the InvestorGuide.com Stock of the Day on 6/17/2009

Watson Pharmaceuticals Inc. (WPI: Charts, News, Offers) has agreed to buy the private drug manufacturer Arrow Group for $1.75 billion. The deal will require Watson to pay $1.05 billion in cash as well as the issuance of $500 million in Watson common stock. Watson Pharmaceuticals will pay the remaining $200 million balance in zero-coupon preferred stock, which will be redeemable three years after the close of the transaction. In addition, Arrow shareholders will receive bonus payments based on sales of the generic version of Lipitor, a popular cholesterol-reduction drug that Arrow manufactures. Why did Watson pay such a high premium for Arrow Group?

The driving force behind the deal for Watson was global expansion. Watson Pharmaceuticals is looking to move into new markets, particularly overseas. In an attempt to keep pace with the rest of the medical drug industry, Watson felt the need to develop international capabilities. Watson Pharmaceuticals Inc. wants to build a strong global pipeline and product portfolio that will enable it to quickly and effectively enter emerging markets. As a result, Arrow Group seemed like the perfect stepping stone to achieving that goal. More >

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Morningstar Analysis for Watson Pharmaceuticals

Watson Pharmaceuticals (WPI) Upgrades

Date
Analyst
Old Rating
New Rating
01/22/2009
Stanford Research
Hold
Buy
09/22/2008
Wachovia upgraded the Generic Drug Sector from Market Weight to
Market Weight
Overweight
04/29/2008
J.P. Morgan
Underweight
Neutral
09/30/2007
Roth Capital
Hold
Buy
09/29/2007
Roth Capital
Hold
Buy
09/28/2007
Roth Capital
Hold
Buy

Watson Pharmaceuticals (WPI) Downgrades

Date
Analyst
Old Rating
New Rating
09/16/2008
Goldman Sachs
Neutral
Sell
03/13/2006
Credit Suisse
Neutral
Outperform
01/11/2006
Morgan Stanley
Underweight
Equal-Weight
09/09/2005
UBS
Reduce
N/A
09/08/2005
UBS
Reduce
N/A
09/07/2005
UBS
Reduce
N/A

Watson Pharmaceuticals (WPI) New Coverage

Date
Analyst
Rating
11/12/2008
Morgan Stanley
Underweight
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Competitor Analysis

Barr Pharmaceuticals
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