Generic drugmaker Mylan Inc said it will buy a unit of India's Strides Arcolab Ltd for $1.6 billion to expand its presence in the fast-growing injectable drugs market.
Mylan also reported a 25 percent rise in fourth-quarter profit, helped by sales of its Epipen auto-injector for the treatment of severe allergic reactions.
The company's acquisition of Agila Specialities, a wholly owned subsidiary of Strides, ends months of speculation regarding its sale, with reports suggesting Pfizer Inc and Japan's Otsuka Holdings as other potential buyers.
The deal will help Mylan, one of the world's largest generic drugmakers, double its injectable drugs portfolio and make it one of the leaders in the rapidly-growing business.
Global generic injectable drug sales are expected to grow faster that other dosage forms, helped by a raft of patent expiries, Mylan said.
The increased portfolio is also likely to help Mylan as many generic injectable drugs, which tend to be administered in hospitals and include treatments for cancer, have been in short supply in the United States.
"Together we will have more than 700 marketed injectables products and a global pipeline of more than 350 injectables products pending approval," Mylan President Rajiv Malik said.
Mylan said the acquisition of Agila, which is based in the southern Indian city of Bangalore, is expected to immediately add to its adjusted diluted earnings following closing.
"We expect the transaction to have a greater than 10 percent return on invested capital by the third full year from closing," CFO John Sheehan said in a conference call.
Canonsburg, Pennsylvania-based Mylan said Agila's strong presence in Brazil represented an attractive opportunity to tap into the difficult market. Agila gets a quarter of its revenue from Brazil, while the United States contributes 40 percent.
Mylan will also pay Strides Arcolab $250 million in potential milestone payments, it said in a statement.
The company said it will not assume any outstanding debt for the deal, which was unanimously approved by its board.
The deal will be funded with existing cash and a senior unsecured bridge term loan of $1 billion from Morgan Stanley, which is also advising Mylan for the deal.
Skadden, Arps, Slate, Meagher & Flom LLP is the legal adviser, Mylan said.
Mylan's shares were up 2 percent in extended trading after closing at $28.57 on Wednesday on the Nasdaq.
The company said fourth-quarter net income rose to $161.9 million, or 39 cents per share, from $129.5 million, or 30 cents per share, a year earlier. Excluding items, the company reported 65 cents per share.
Total revenue rose 12 percent to $1.72 billion.
Analysts had expected a profit of 64 cents per share on revenue of $1.73 billion, according to Thomson Reuters I/B/E/S.
The company forecast 2013 earnings $2.75 to $2.95 per share on revenue of $7 billion to $7.4 billion. Analysts were expecting earnings of $2.80 per share on revenue of $7.16 billion.