Mylan Gains, Perrigo Falls as Takeover Offer Is Seen Failing

  • Shares tendered poised to fall short of 50% threshold: WSJ
  • Mylan can't make hostile approach for 12 months if deal fails

Mylan NV shares jumped on speculation the company failed to attract a majority of Perrigo Co. shareholders by a Friday deadline for its $26 billion unsolicited offer to acquire the over-the-counter drugmaker.

Perrigo shares slid 8 percent to $144. Hours before the deadline of 8 a.m. New York time Friday to accept Mylan’s offer, it appeared that the number of shares tendered wouldn’t exceed the required 50 percent threshold, the Wall Street Journal reported, citing people familiar with the matter. Mylan and Perrigo press representatives didn’t respond to requests for comment.

The result would prevent Mylan from making another hostile approach within 12 months. The generic-drug maker’s shares rose 11 percent in early trading to $47.75. While Executive Chairman Robert Coury had promoted the deal as a logical step in Mylan’s strategy, advisory firm Institutional Shareholder Services had warned that the acquisition wouldn’t be profitable for Mylan in the first three years after completion.

Mylan offered $75 in cash and 2.3 Mylan shares for each Perrigo share, a bid that Dublin-based Perrigo had rejected as inadequate. Perrigo makes prescription and over-the-counter drugs that Mylan wanted to add to its lineup as EpiPen, its allergy medication, faces generic competition as early as next year. Mylan initially argued that the Perrigo deal was a better alternative than accepting a takeover offer from Teva Pharmaceutical Industries Ltd. Teva later walked away from a deal with Mylan in favor of buying Allergan Plc’s generics business.

Mylan was overpaying for Perrigo, said Ronny Gal, an analyst at Sanford C. Bernstein & Co., in a note. A failed bid would free up executives to focus on better moves such as share repurchases or acquisitions of the generic assets of Sanofi or Pfizer Inc., he said.

Industry Consolidation

The Perrigo acquisition would have added to sweeping changes in the drug industry as manufacturers and distributors use mergers to gain leverage in negotiations over price. While Mylan and Teva sought to grow larger through acquisitions, Walgreens Boots Alliance Inc. struck a deal to buy fellow drugstore chain Rite Aid Inc., and CVS Health Corp. agreed to take control of Target Corp.’s pharmacies and clinics.

Those other deals are still awaiting clearance from regulators. Mylan won U.S. antitrust approval for the Perrigo bid after agreeing to sell rights to seven generic drugs to resolve claims that the purchase would harm competition.

Perrigo Chief Executive Officer Joe Papa has said the company is capable of delivering better growth through its own acquisitions, rather than through a sale to Mylan.

“Once we get beyond this Mylan situation, we’ll look at other opportunities as far as M&A is concerned,” Papa told reporters in Tel Aviv last month. “We’ve been very active ourselves in M&A and I do expect we’ll be doing more deals.”

To defend itself, Perrigo had raised questions about whether Mylan acts in the best interests of its shareholders. The generic drugmaker, based in the Netherlands and run from Canonsburg, Pennsylvania, said it would ask its shareholders to vote on changes to its corporate governance, including the nomination and election of directors, if it were to complete its bid for Perrigo.

Mylan also said last week that it would propose a shareholder vote on whether to retain a Dutch structure known as a stichting, an independent foundation that can help block takeover attempts. It didn’t specify what changes it would make on board elections. It’s unclear whether the company still plans to revise its corporate governance if the Perrigo bid fails.

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