Canaccord Genuity issued a note commenting on a potential tie-up between Impax Laboratories and Amneal Pharmaceuticals.
The broker said the deal would consist of a cash-free merger of equals as both companies are cash-poor. Canaccord also said that a $2 billion “potential valuation for Impax seems pricey but when around $100 million in annual synergies is factored in, the deal price begins to seem reasonable.
The word Synergy is little scary. Normally it is accomplished by shutting down common products, common facilities and common talents. $100 million in annual synergies means downsizing by that much amount. If they decide to meet 50% target from products and 50% from workforce reductions, we are talking about north of 500-600 employees (Amneal+Impax) to let go in newly formed company.