Generic drugmaker Actavis, which has been the subject of takeover speculation, plans to buy specialty pharmaceutical company Warner Chil- cott for $5 billion in stock.

The companies said the deal had an enterprise value, including debt, of $8.5 billion.

The move comes as Actavis has spurned approaches from Canadian pharmaceutical company Valeant Pharmaceuticals International and Mylan.

Analysts have said that if Actavis were to buy Warner Chilcott, it would kill its chances of being taken over.

Warner Chilcott shareholders will receive 0.16 share of the combined company. The companies said that would equate to $20.08 a share, based on Actavis’s closing share price of $125.50 last Friday.

The purchase price is a 34 per cent premium to Warner Chilcott’s closing share price of $15.01 on May 9th, the day before the firms disclosed that they were in talks. Warner Chilcott shares have since risen and closed on Friday at $19.19, narrowing the premium to less than 5 per cent.

Because Warner Chilcott is based in Ireland, the deal creates a money-saving lower tax rate for Actavis, analysts say. The combined company would have $11 billion in annual sales.

Reuters