POTTERS BAR, England—As April comes to a close, neither Teva Pharmaceutical Industries Ltd. nor Mylan N.V. are seeing any progress with their respective acquisition proposals (Teva for Mylan, and Mylan for Perrigo). Mylan announced on April 27 that its board of directors unanimously rejected Teva's unsolicited expression of interest, concluding after a review of the proposal that “the approach did not meet any of the key criteria that would cause the Mylan Board to depart from the Company's successful and longstanding standalone strategy and consider engaging in discussions to sell the Company.”
"Our board has a very important fiduciary obligation to protect the best interests of the company's shareholders and other stakeholders, and has always been open to considering all paths forward in that regard, and this situation is no different. However, that does not mean we will entertain offers that grossly undervalue the company and leave our shareholders and other stakeholders exposed to serious risk,” Robert J. Coury, executive chairman at Mylan, noted in a statement. “After thorough consideration, Mylan's board unanimously determined that Teva's proposal grossly undervalues Mylan, and would require Mylan's shareholders to accept what we believe are low-quality Teva shares in exchange for their high-quality Mylan shares in a transaction that lacks industrial logic and carries significant global antitrust risk. In addition, we also believe that the proposal does not address the serious challenges of integrating two fundamentally different and conflicting cultures under a Teva board and leadership team with a poor record of delivering sustainable shareholder value. We believe that these challenges would make it very difficult to generate value from this combination for Mylan shareholders.”
"Furthermore, the proposal contains nothing meaningful indicating why a combination with Teva would be in the best interest of Mylan's employees, patients, customers, communities and other stakeholders,” Coury added. “In summary, the Board determined that Teva's expression of interest is not in the best interests of Mylan, its shareholders or other stakeholders, and we believe that this is only a mere attempt by Teva to frustrate and distract Mylan from its business plan and strategy.”
In a letter to Teva, Coury emphasized that Mylan is not for sale, but noted that the company's board wanted to pass along an explanation of what it would take for them to consider selling the company and the issues with a possible merger with Teva. Coury noted that Mylan's board “will certainly not consider engaging in discussions to sell the Company unless the starting point of the discussions is significantly in excess of $100 per share,” adding that “There is simply no ultimate benefit in the three core areas that we believe are essential to any transaction in our industry: geographic reach, portfolio diversification and capability expansion.” The letter also cited “the persistent turnover and turmoil amongst the Teva leadership and board and the resulting strategic confusion,” as well as the regulatory risk associated with the proposal, namely the significant overlap geographically and in terms of capabilities.
In response, Teva issued a press release reiterating its commitment to the combination at the stated proposal price, with Erez Vigodman, president and CEO of Teva, saying that “While we are disappointed that Mylan has formally rejected our proposal, the Teva Board and management team are fully committed to completing the combination of Teva and Mylan, and we stand ready to quickly complete a transaction that is compelling for both Teva and Mylan stockholders. We are eager to work with Mylan and its advisors to complete a transaction that will allow us to deliver the value inherent in the proposed combination to our respective stockholders, employees, patients, customers, communities and other stakeholders.”
For its part, Mylan is increasing its efforts in the wake of Perrigo Co. plc's dismissal of its first offer by upping the stakes. The company announced today that it had increased its offer to $75 in cash and 2.3 Mylan shares for each share of Perrigo stock, for a value of $232.23 per Perrigo share and a total deal value of roughly $32.7 billion. The increased offer would result in Mylan shareholders owning roughly 60.7 percent of outstanding Myland shares after the completion of the deal, with former Perrigo shareholders owning roughly 39.3 percent on a fully diluted basis.
Coury noted that, "With this enhanced offer, I look forward to meeting with Joe Papa and his team to finalize the implementation of this truly compelling combination, which is a win-win for both Mylan and Perrigo shareholders and all other stakeholders. Previously, Mylan filed for U.S. anti-trust clearance, made a "hell or high water" commitment with respect to obtaining this clearance and committed to a timetable for closing. We have also secured firm committed financing for our offer. All of this, together with today's action, will result in a transaction that provides compelling value and maximum speed and certainty to Perrigo and its shareholders. Further, this is a transaction that can, and will, be completed and create a powerhouse company that will be an engine for growing shareholder and stakeholder value as Mylan has done consistently for many years.”
Perrigo's leadership isn't convinced, apparently, as it issued a second rejection the same day, noting that “The Board previously concluded that Mylan's unsolicited proposal of April 8 of $205.00 per share significantly undervalued the company and its future growth prospects and was not in the best interests of Perrigo's shareholders. Today's announcement from Mylan continues to propose a price lower than the previously rejected proposal. Based on Mylan's unaffected price of $55.31 per share on March 10, 2015, the last day of trading prior to widespread public speculation that Teva was considering an offer for Mylan, the value of the revised Offer is $202.20 per Perrigo share.” The company advised its shareholders not to take any action in relation to Mylan's offer.