Teva Buying Mylan Stock May Portend Showdown at Investor Meeting

Teva Pharmaceutical Industries Ltd.’s purchase of a 1.35 percent stake in Mylan NV on the open market signals that the Israeli drugmaker may be preparing for a legal fight as a key shareholders meeting approaches.

The stock purchases, in a range of $69 to less than $71 a share, make Teva the 10th-largest investor in Mylan with a $475 million stake, according to data compiled by Bloomberg. That compares with Teva’s offer last month of $82 a share in cash and stock, a bid that Mylan has rejected.

The transactions set the stage for a Mylan shareholders’ meeting tentatively set for early in the third quarter, at which the board will ask investors to approve a proposed acquisition of Perrigo Co. According to corporate law in the Netherlands, where Mylan is legally registered, one or more shareholders with at least a 3 percent stake can place an item on a meeting agenda.

“Teva is indicating they want an invitation to the session,” said Ori Hershkovitz, founding partner and chief investment officer at Nexthera Capital, a New York-based hedge fund. “And they want to build pressure on the board to engage until then. I imagine they were advised to do this by their legal counsel.”

Generic Leadership

Teva is pursuing Canonsburg, Pennsylvania-based Mylan to regain market share it has lost to Indian manufacturers such as Sun Pharmaceutical Industries Ltd. The deal would create a generic-medicine powerhouse with more than $27 billion in revenue and re-establish Teva as the unchallenged giant in the industry.

“Acquiring shares of Mylan underscores our commitment to consummating a transaction as soon as possible,” Teva said in a statement Wednesday. “Teva is ready to meet with Mylan and its advisers to discuss the transaction.”

John Paulson’s hedge fund Paulson & Co. has also been boosting its stake in Mylan, signaling it too may want a bigger say in the fate of the merger talks. Paulson has experience with hostile takeovers in the Netherlands after joining forces in 2006 with U.K. hedge fund Centaurus Capital Ltd. to buy more than one-third of Stork NV before the Dutch builder of airplane parts was sold to Candover Investments Plc.

Teva gained 1 percent to 236.20 shekels at 1:03 p.m. in Tel Aviv trading. Mylan rose 2.1 percent to $72.04 at the close in New York on Wednesday.

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