UPDATE: Teva scores a takeover talking point as Perrigo board rejects Mylan bid
UPDATE: On Tuesday, April 21, Perrigo's Board of Directors voted unanimously to reject Mylan's $29 billion takeover bid for the company, on the same day that Teva offered $40 billion to buy Mylan. This may give Israel-based Teva a key talking point as it attempts to woo Mylan shareholders towards supporting a sale, as the firm had already argued that its cash-and-stock offer was a better deal for Mylan's stakeholders than a Mylan-Perrigo deal.
The Perrigo board said that Mylan's $205 per share offer "substantially undervalues" Perrigo and would deny the company's shareholders many benefits. In a statement, Perrigo CEO Joseph Papa emphasized that his company has a "strong independent future."
"The Board’s confidence is built upon the Company’s durable competitive position, compelling growth strategy, and strong and consistent track record of delivering results for shareholders under its experienced management team," said Papa. "Since fiscal 2007, we have delivered compound annual sales growth of 16%, increased adjusted operating margin by over 1,600 basis points and generated total shareholder returns of over 970%."
It's unclear at this time whether Perrigo would entertain a sale to Mylan given a higher bid.
- On Tuesday, April 21, Teva proposed a $82 per share, $40 billion cash and stock bid for Mylan—a 20% premium over the latter firm's closing price on Monday. Mylan shares went soaring on the news. According to analysts, a Mylan acquisition by Teva could help offset revenues lost to patent expiration of the latter company's biggest-selling drug, Copaxone(glatiramer), which is used to treat patients with remitting relapsing multiple sclerosis (RRMS), and Teva is exploring such a deal.
- Acquisition of Mylan would result in an immediate profit boost for Teva, with anticipated EPS of $5.60, according to one analyst. Teva spokespeople said that a Mylan merger could generate $2 billion per year in cost and tax savings for the combined company. The FDA approved the first U.S. generics of Copaxone last week, Momenta/Sandoz's Glatopa.
- Mylan, which recently bid $29 billion for Perrigo (in a move that some say was meant as a defensive play against a Teva buyout effort), has not been enthusiastic about a Teva deal. The firm's CEO even called such a deal lacking in "sound industrial logic or cultural fit" and insisted Mylan would rather stand on its own and pursue its own deals.
Cowen Group analyst Ken Cacciatore told Bloomberg News he anticipates that, if Teva were to acquire Mylan for a 30% premium, or $90 per share, that the synergies for Teva would amount to a total of $2 billion. UPDATE: Teva estimates that its 20% premium offer would also result in those approximate savings.
While the numbers are all based on a set of assumptions that have not yet played out, one thing is clear: Acqusition of Mylan would make Teva less dependent on Copaxone, which generates roughly $20 billion per year in revenues.
So far, Mylan's bid for Perrigo is the biggest such bid of the year; however, if Teva buys Mylan, this deal will become the biggest deal of the year. But Mylan's leadership, and particularly CEO Robert Coury, have tried to swat down the possibility of a deal taking place, emphasizing that the company isn't interested and doesn't think it would be a good fit.
On Tuesday, Teva said that Coury's protestations were premature, and that the company would look forward to meeting with Mylan's board to discuss the unsolicited bid. Teva has also been trying to win over Mylan shareholders by arguing that a sale to Teva would be better for them than a buyout of Perrigo.