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Deal watch: drugs are working as Covington and Latham lead on $2.6bn pharma acquisition

The lucrative pharmaceutical sector continues to provide a corporate boon to Global 100 firms, with Covington & Burling and Latham & Watkins winning key roles on Salix Pharmaceutical’s $2.6bn acquisition of specialty pharmaceutical company Santarus, announced yesterday (7 November).

With the firm’s longstanding reputation as a leading adviser on both corporate and regulatory matters to life sciences clients a key factor behind its 44% increase in revenues over the last five years to $731m, the Covington team advising Salix is being led by corporate partners Edward Britton and Catherine Dargan out of Washington.Meanwhile, the acquisition finance team is led by finance and capital markets partners Mike Lefever and Kerry Burke. Completing the Covington partner line-up are life sciences partner Amy Toro; co-chair of the firm’s securities practice David Martin; employee benefits partner Mike Francese; food and drug regulatory co-chair Peter Safir and regulatory specialist Scott Cunningham.

Latham – itself no slouch in financial terms, increasing turnover 11% over five years to $2.2bn in 2012 – is advising Santarus, led by corporate partner and San Diego office head Scott Wolfe. The team includes employee benefits and compensation partner Jim Barrall, intellectual property partner John Wehrli, Laurence Stein in tax, finance specialist Christopher Plaut and Washington based life sciences regulatory partner Ben Haas.

Salix is financing the transaction with a combination of approximately $800m cash and $1.95bn in financing from investment bank Jefferies, with the bank committing an additional $150m in a revolving credit facility. The deal is expected to close in the first quarter of 2014.

Salix said the acquisition is driven by the company’s desire to cement its position as the number one pharmaceutical provider in the gastrointestinal market as the deal includes Santarus’s portfolio of drugs aimed at battling gastrointestinal disorders such as acid reflux.

According to data recently compiled by Bloomberg, there have been 44 acquisitions of speciality drug companies for more than $500m in the last three years. As such, the sector has kept leading M&A practices well fed recently, with Linklaters and Hengeler Mueller advising on California drugs wholesale group McKesson Corporation’s $8.3bn acquisition of German counterpart Celesio from holding company Franz Haniel & Cie last month.