Mylan Strikes $7.2 Billion Deal for Meda as Earnings Miss

  • Price represents a 92% premium to Meda's close on Wednesday
  • Meda board has recommended offer be accepted, Mylan says

Mylan NV said it will buy Meda AB in a cash and stock deal worth about $7.2 billion, adding the Swedish company’s specialty drug products and European operations.

Mylan will pay 165 Swedish kronor ($19.62) per share, a 92 percent premium over Meda’s closing price of 86.05 kronor on Wednesday and more than Meda’s all-time high of 150.80 kronor. It’s one of the highest premiums ever paid in a pharmaceutical industry deal worth $5 billion or more, though it’s in the middle of the pack as a multiple of earnings.

Meda’s board recommended that the offer be accepted, and two major Meda shareholders that own about 30 percent of its stock will accept the deal, Mylan said in a statement.  Stena Sessan Rederi AB owns about 21 percent, and Fidim Srl about 9 percent, according to Mylan. Before the announcement, Meda had a market valuation of about $3.7 billion.

The agreement with Meda comes after Mylan’s failed $26 billion attempt last year to buy Perrigo Co., a maker of over-the-counter drugs. Mylan, which has a legal address in the Netherlands and is run from Canonsburg, Pennsylvania, has been attempting to expand and diversify through deals.

Long Pursuit

Mylan’s pursuit of Meda has been a lengthy one, and comes as the generic drug industry has been consolidating with deals by Mylan, Allergan Plc, Teva Pharmaceutical Industries Ltd. and others. Mylan made two offers -- both rejected -- to Meda in 2014, for as much as 43.8 billion kronor ($6.7 billion). Soon after, Meda said it preferred to buy rather then be bought and would hunt for its own acquisitions.

Mylan revisited its pursuit of Meda this past summer and the two sides continued talks throughout the fall, Chief Executive Officer Heather Bresch said Wednesday on a call with investors.

“We believe we are paying an attractive multiple that is in line with market precedents for such scarce, high-quality assets,” Bresch said.

The deal will shift the composition of the Mylan’s portfolio, reducing its reliance on generic drugs so that they make up about half of sales. Meda’s specialty drugs are higher-margin products, Mylan executives said on the call, and the deal will accelerate the company’s growth into a variety of emerging markets.

Accretion

The agreement with Meda will add 35 cents to 40 cents to earnings next year and will save about $350 million in annual costs, Mylan said in the statement. Mylan will pay at least 80 percent of the purchase price in cash, with the rest in an adjustable number of shares based on Mylan’s stock price.

“Each Meda shareholder will receive between SEK 152 and SEK 165 per Meda share in a combination of cash and Mylan shares,” Mylan said.

Mylan fell 9.1 percent to $45.95 in trading after the market closed in New York.

Fourth-Quarter Earnings

Mylan also reported fourth-quarter earnings on Wednesday that fell short of analysts’ expectations. Profit, excluding certain items, was $1.22 a share, compared with a $1.28 average of analysts’ estimates.

Revenue from the specialty division rose 4.7 percent to $254.1 million in the fourth quarter. Mylan’s EpiPen is the unit’s main product and accounts for most of the division’s sales. EpiPen got a boost in October after a rival product made by Sanofi was recalled because there was a chance that the device wasn’t delivering the drug. Mylan said that pressure from payers, like insurers and pharmacy benefit managers, hurt EpiPen sales in 2015 and that the environment wasn’t likely to change in 2016.

Fourth-quarter net income attributable to Mylan rose to $194.6 million, or 38 cents a share, from $189 million, or 47 cents, a year ago. The decline in earnings per share is because Mylan issued additional stock.

Mylan also gave a forecast for 2016, including:

  • $4.85 to $5.15 in adjusted earnings per share; analysts had expected $5
  • $10.5 billion to $11.5 billion in sales; analysts had called for $10.62 billion
  • Mylan said it will hit its long-term target of more than $6 a share in adjusted earnings in 2017, a year earlier than it has promised

Centerview Partners acted as Mylan’s financial adviser for the deal with Meda, and Cravath, Swaine & Moore LLP, Vinge, and NautaDutilh were legal advisers. Rothschild & Co. was Meda’s financial adviser.

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