Teva Pursuit of Mylan Shares Affords Chance to Sway Shareholders

Teva Pharmaceutical Industries Ltd. raised its stake in Mylan NV above 3 percent, a threshold that gives it power to submit agenda items at a crucial shareholders’ meeting next quarter.

Teva, which has offered $40.1 billion in cash and stock to buy its U.S. rival, now ranks as Mylan’s eighth-largest investor with a stake worth more than $1 billion, according to data compiled by Bloomberg.

Teva is amassing Mylan shares as the Israeli company says it remains committed to getting a deal done. Passing the 3 percent mark may give it more influence over shareholders. Mylan’s management has so far rejected Teva’s offer, saying that it prefers to go ahead with an attempt to buy drugmaker Perrigo Co. for about $32.7 billion.

“Teva is showing it’s willing to put chips on the table to complete this deal,” said Steven Tepper, a biomedical analyst at Migdal Capital Markets Ltd. in Tel Aviv. “They are likely to continue buying and to use this as leverage against Mylan’s management.”

Mylan, based in Canonsburg, Pennsylvania, relocated to the Netherlands last year and set up a centuries-old legal structure known as a stichting that can discourage an unwanted takeover offer by issuing new shares.

Dutch corporate law also allows investors with a stake of at least 3 percent to propose agenda items at shareholder meetings. Mylan Chief Executive Officer Heather Bresch has said the company will ask shareholders to vote on the Perrigo deal in July or August.

The foundation, or stichting, said June 4 it has concerns about Teva’s share purchases.

“You have been saying you are a Dutch company when you believe it helps you create unprecedented governance structures, a U.K. company when it helps you lower your U.S. taxes, and a U.S. company when you believe it helps you prevent Teva from purchasing Mylan shares,” Teva Chief Executive Officer Erez Vigodman wrote in a letter to Mylan Executive Chairman Robert Coury on June 8. “Teva’s acquisition of Mylan shares is in compliance with applicable law.”

The purchases are also saving Teva money as it pursues an offer valuing Mylan at $82 a share. Each percentage point bought at Mylan’s closing price of $73.80 on June 9 saves Teva about $400 million.

The next key threshold will be when Teva accumulates a 4.6 percent stake, allowing it to initiate inquiry proceedings before the Dutch Enterprise Chamber. When Teva reaches that level, it’s likely to make a formal tender offer for Mylan shares, according to Liav Abraham, an analyst at Citigroup Inc.

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