Mylan Board Unanimously Rejects Takeover Bid as Too Low

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Mylan Board Rejects $40.1B Teva Takeover Bid

Mylan NV’s board unanimously rejected a $40.1 billion takeover offer from Teva Pharmaceutical Industries Ltd., saying it’s too low and doesn’t address the difficulties of combining companies with different cultures.

The board won’t consider talks to sell the company unless it gets an offer of significantly more than $100 a share, Mylan said in a statement Monday. Teva offered $82 a share in cash and stock for Mylan last week.

“The Mylan board concluded 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,” Mylan said.

Mylan is instead pursuing a separate hostile $31.2 billion bid for fellow drugmaker Perrigo Co., saying the transaction would be more complementary in terms of products and regional assets. Unlike Teva, which is based in Israel, Mylan and Perrigo have operational headquarters in the U.S. and have moved their tax domiciles to Europe for tax purposes.

Mylan shares dropped 5.7 percent to $71.72 at the close in New York, their steepest one-day decline since August 2011. Teva’s American depositary receipts slipped 4.3 percent to $61.63. Perrigo fell 2.4 percent to $188.28.

Teva said in a statement that the company was ready to meet with Mylan and quickly complete a deal.

In a letter included in Mylan’s statement, Chairman Robert Coury described a meeting with Teva Chief Executive Officer Erez Vigodman in New York last Friday. Coury said the two discussed “Teva’s many struggles throughout the last several years,” including generic competition, turnover in upper management and the search for new sources of growth.

Rising Prices

Consumer advocates, pharmacists and other groups have expressed concern that a merger of Teva and Mylan would contribute to a trend of rising prices for generic drugs. Some 10 percent of generic drugs doubled in price between July 2013 and June 2014, and half of all generic drugs rose in price, according to an analysis of Centers for Medicare and Medicaid data cited by Senator Bernie Sanders, an independent from Vermont, and Representative Elijah Cummings, a Democrat from Maryland.

“We’ve got to get to the bottom of these enormous price increases,” Sanders said in a statement last week. “Market consolidation and less competition in the industry is a possible factor we need to take a look at.”

Mylan would only consider a takeover if the acquirer assumed all the regulatory risk, Coury said. Combining with Teva “would create significant antitrust concerns,” since both are big producers of generic drugs, he said.

Teva’s Problems

“For the sake of your current and future shareholders, employees, patients, customers, communities and other stakeholders, I do hope you find a way to eventually change Teva’s culture and establish credibility in your business dealings,” Coury told Vigodman in the letter. “However, we do not wish to make Teva’s problems Mylan’s problems.”

Teva said it was already working with antitrust regulators and was confident it could get approval.

Vigodman was “disappointed that Mylan has formally rejected our proposal,” he said in a statement. “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.”

The love triangle developing between Teva, Mylan and Perrigo is adding to what has already been a record period for mergers and acquisitions in the pharmaceutical industry. Generic-drug makers announced or completed more than $100 billion in deals last year, five times more than any year since 2005. Actavis Plc agreed to buy Botox maker Allergan Inc. for $65 billion in the biggest deal last year.

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