Mallinckrodt and Endo have agreed to merge in a stock and cash transaction valued at an implied enterprise value of $6.7bn.
The deal is expected to result in a global pharmaceutical company with an expanded portfolio and increased financial scale.
As per the terms of the agreement, Endo shareholders will be paid $80m in cash, subject to possible adjustments, and will hold a 49.9% stake in the combined entity on a pro forma basis. Mallinckrodt shareholders will retain 50.1% ownership.
Mallinckrodt will continue as the holding company for the combined business, with Endo becoming a wholly owned subsidiary. The combined company intends to list on the New York Stock Exchange (NYSE), pending approval from its board of directors.
Following the completion of the transaction, the companies plan to integrate their generic pharmaceuticals businesses and Endo’s sterile injectables division. A separation of this unit from the combined company is planned at a later stage, subject to approval by the board of directors and other conditions.
The merger will bring together pharmaceutical brands across multiple therapeutic areas, including XIAFLEX, Acthar Gel, Terlivaz, SUPPRELIN LA, and AVEED. The combined company intends to strengthen its portfolio with a focus on rare and orphan disease treatments.
The financial structure is expected to provide flexibility for further expansion, with net leverage of approximately 2.3 times anticipated at closing. The enlarged company plans to invest in product development, business acquisitions, and additional capabilities in targeted therapeutic areas.
The combined entity will have an expanded presence in sterile injectables and generics, with a portfolio spanning multiple delivery technologies, formulations, and dosage forms.
Endo interim CEO Scott Hirsch said: “We believe this combination with Mallinckrodt, along with the subsequent separation of the combined sterile injectables and generics business, presents a unique opportunity to deliver significant shareholder value.
“The combined company will possess a branded business with the scale, cash flow and balance sheet strength to invest in both internal and external growth opportunities, including pursuing commercial-stage assets. Additionally, the stable and robust free cash flow generated by the combined sterile injectables and generics business should enable consistent capital returns to shareholders following its separation.”
Pro forma revenue of the combined group for 2025 is projected at $3.6bn, with adjusted EBITDA estimated at $1.2bn. Cost synergies are expected to reach at least $150m annually by the third year, with an estimated $75m in savings anticipated in the first year, primarily through business function integration and research and development efficiencies.
The enlarged company will operate with a primary footprint in the US, supported by locations in Europe, India, Australia, and Japan. The combined operations will include 17 manufacturing facilities and 30 distribution centres, with approximately 5,700 employees at closing.
Sigurdur Olafsson, who is currently the President and CEO of Mallinckrodt, will serve in the same roles in the combined company. The enlarged entity’s global headquarters will remain in Dublin, Ireland, while the location of the US headquarters and the corporate name will be disclosed at a later date.
Olafsson said: “Our businesses are highly complementary, with durable, on-market products in our branded portfolios and extensive capabilities across the value chain in our generics businesses. This exciting combination will create a larger and more diversified entity with the scale and resources needed to unlock the full potential of both companies.”
The boards of directors of both companies have approved the transaction. The deal is subject to shareholder approvals, regulatory clearance, and customary closing conditions, with completion expected in the latter half of this year.
Earlier this week, Endo entered into an agreement to divest its international pharmaceuticals business, primarily operated through Canada-based Paladin Pharma. The business is being sold to Knight Therapeutics in a transaction valued at up to $99m.
The deal includes an upfront cash payment of $84m, with an additional $15m in potential milestone-based payments.
