Concordia Healthcare ‘not done yet’ with deals

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After months of speculation, Concordia Healthcare Corp. has pulled the trigger on a major acquisition. The Oakville, Ont.-based pharma company is paying $1.2-billion (U.S.) in cash to acquire a suite of drug products from privately held, Switzerland-based, Covis Pharma and Covis Injectables. The Covis deal – dubbed "Project Phoenix" by the lawyers – is Concordia's biggest to date and more than four times bigger than its acquisition of Donnatal from Revive Pharmaceuticals last year. And it won't be its last.

Concordia shares shot up on the announcement to a new all-time high. The company whose market cap is north of $2.2-billion went public in December 2013, and its stock, much like Valeant Pharmaceuticals International Inc.'s has been driven higher by a wave of acquisitions. However, unlike Valeant, which acquires companies hook line and sinker, Concordia acquires individual "legacy" drugs from pharma companies. Legacy drugs are those whose patents have expired but still generate plenty of cash.

In the summer of 2014, explained Concordia CEO Mark Thompson via a phone interview, Concordia executives met with Covis representatives to talk about buying a single asset from the company. "That didn't go anywhere," said Mr. Thompson.

On January 15, while attending the JPMorgan Healthcare Conference in San Francisco, Dan Peisert, VP of business development at Concordia went for a coffee with a few chaps at Covis. That meeting appears to have been a crucial one. Mr. Thompson recounts getting a call from Mr. Peisert at the time.

"He said we should really sit down with these guys because I think this could be very interesting for us."

Mr. Thompson then met with the same Covis representatives and "over a one hour conversation" it was clear that the company was now interested in doing a deal. Ten days later Concordia sent a term sheet to Covis.

" [Cerberus Capital Management] was their principal investor. We worked together and, lo and behold, from the 25th of January to this past Friday, we got the deal done. So it was very rapid."

One reason Concordia was able to move fast is because its financing was lined up months earlier. There was a "beauty contest" in October and November among the major lenders who were vying for Concordia's business said Mr. Thompson.

RBC Dominion Securities Inc. won out and is providing Concordia with a $1.6-billion loan to fund the deal and refinance its debt.

Bourne Partners LLC were financial advisers to Covis on the deal. Lowenstein Sandler PC provided legal counsel to Covis, while Sullivan & Cromwell and Fasken Martineau DuMoulin LLP gave legal advice to Concordia.

Mr. Thompson pooh poohed any notion that Concordia might take an extended break from mergers and acquisitions, saying the company is "not done yet, by any stretch of the imagination. There's no reason for us to take our foot off the gas."