Teva Plans to Raise Mylan Bid to $86-$88/Share This Week

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Teva Pharmaceutical Industries Ltd. is preparing to raise its bid for rival drugmaker Mylan NV by as much as $2 billion, to $43 billion, and may announce the improved proposal as soon as this week, people with knowledge of the matter said.

Teva may offer $86 to $88 a share for Mylan, said the people, who asked not to be identified because the information is private. That compares with the $82 a share Teva offered in April, a price that valued the Canonsburg, Pennsylvania-based company at about $40.1 billion. Mylan had a market value of about $34.4 billion as of last week’s close.

Unlike its previous expression of interest, Teva plans to make the next offer formal as it seeks to thwart the U.S. drugmaker’s pursuit of Perrigo Co., the people said. Mylan is planning to hold a shareholder meeting this summer to vote on its Perrigo proposal, and an offer from Teva would pose an alternative for proxy firms advising Mylan shareholders.

A new takeover proposal at the level Teva is contemplating would mark the drug industry’s largest this year and signal an intensifying battle for pharmaceutical assets that threatens to become increasingly hostile.

Teva’s approach in April was based on the condition that Mylan drop its bid for Perrigo. Mylan instead raised its offer for the Dublin-based company to $32.7 billion, its third proposal to be rebuffed.

Representatives for the companies declined to comment. Mylan climbed 0.9 percent to $70.75 at the close in New York, while Petach Tikva, Israel-based Teva’s American depositary receipts rose 0.2 percent to $61.66.

Blocking Mechanism

The company, which is officially incorporated in the Netherlands, set up a mechanism in April under Dutch securities law that could make a takeover tougher. Mylan issued an option that lets an external foundation acquire a majority stake at any time, providing a way to block an unwanted suitor. Teva has sought to exploit Dutch law to its advantage, buying a 4.6 percent stake that allows it to challenge Mylan’s board at the Enterprise Chamber in Amsterdam.

Teva Chief Executive Officer Erez Vigodman told a group of Israeli institutional investors that the company plans “certain steps” ahead of Mylan’s shareholder meeting, according to two people present at the closed meeting. When Vigodman was asked if he would sweeten Teva’s offer, he didn’t rule it out, the people said.

The foundation, Stichting Preferred Shares Mylan, said on June 4 that it has concerns about Teva purchases of Mylan shares. Mylan has said it is seeking to stay independent, contending that a combination with Teva would be hampered by antitrust hurdles and a poor cultural fit.

A Teva-Mylan deal would create a generic-drug powerhouse with more than $27 billion in revenue and solidify Teva’s role as the industry giant. The Israeli company has lost market share to Indian manufacturers such as Sun Pharmaceutical Industries Ltd. Vigodman has pledged to look for deals as Teva’s best-selling product, the branded multiple sclerosis drug Copaxone, faces competition from generics. Barclays Plc and Greenhill & Co. are advising Teva on the offer.

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