Prof. Ian Giddy, New York University
Based in Iceland, Actavis is one of the world's faster growing generic pharmaceutical companies. In mid 2006, the company made a bid for Croatia's leading generics company. The offer was half in cash, and half in shares. Management of the target company advised shareholders not to accept Actavis' bid, which was made in shares. Actavis, they argued, was overvalued and overleveraged, like the Icelandic market as a whole. They pointed to the fact that while the bidder's share price had risen 35% during the past year, earnings were flat.
HSBC was hired by a group of the target company's investors to provide an objective valuation of Actavis, based on the company's projected free cash flows. The financial information they used was as follows:
1. Use the data given above to calculate the Enterprise Value of Actavis