Mallinckrodt to merge with Endo in a $6.7bn deal

Mallinckrodt is an American Irish domiciled manufacturer of specialty pharmaceuticals, and they have agreed to merge with Endo, an American diversified pharmaceutical company. From a business sense, this merger makes sense as both businesses are highly complementary to each other, and various synergies will be exploited based on their branded portfolios. The new pharmaceutical entity will have a stronger financial position and greater flexibility to invest in innovation. Mallinckrodt will continue as the holding company, and Endo will be a wholly owned subsidiary. The financial advisors that worked on this deal include Goldman Sachs for Endo and Lazard for Mallinckrodt. The new company will now be listed on the New York Stock Exchange (NYSE), and the deal was announced on the 13th of March 2025.

Goldman Sachs played a significant role in both the financing and the advisory side of the deal between Mallinckrodt and Endo, including the $900 million financing for the Endo acquisition. The financing package included a $500 million incremental term loan facility and a $400 million bridge facility for the transaction. Additionally, the deal is structured so Endo shareholders will receive $80mn in cash up front. After the transaction, Mallinckrodt shareholders will own 50.1% of the combined company, while Endo shareholders will own 49.9%. They are expected to generate at least $150 million of annual pre-tax run-rate operating synergies by the third year and approximately $75 million of pre-tax synergies in Year 1 following close.

The new combined portfolio of the two corporations can combine Mallinckrodt's branded drugs, such as Terlivaz, with Endo’s generics and sterile injectables businesses. There are clear synergy opportunities in areas like sales and marketing, supply chain, and operations, which will help the combined company invest in innovation and growth. Subsequently, they plan to combine their generic pharmaceuticals businesses and potentially separate Endo's sterile injectables business later. In terms of their new management, Mallinckrodt CEO Siggi Olafsson will lead their combined company. Their new company will have an operating footprint, primarily located in the US and supported by capabilities in Europe, India, Australia, and Japan. Their new presence should contain 17 manufacturing facilities, 30 distribution centres, and approximately 5,700 employees.

Their projected revenue for 2025 is expected to close at $3.6 billion, and their adjusted EBITDA at $1.2bn. This is much greater than Mallinckrodt’s 2022 revenue, which was at $1.91bn before its financial restructuring. The company reached bankruptcy twice, in 2020, for its high debt load and litigation over alleged deceptive marketing for their highly addictive generic opioids, and in 2023 due to poor sales of its key branded drugs, including Acthar Gel. However, the new deal commencing should strengthen their market position in the drug space and prevent future bankruptcies from occurring.

Sources: MergerLinks, Investors in Healthcare, Reuters, DCAT Value Chain Insights