Mylan (MYL) Ups Bid for Perrigo (PRGO) to $32.7B, As M&A Hungry Hippos Continues
Pittsburgh, Penn.-based Mylan Pharmaceuticals, Inc. (MYL)’s has upped its previous $30 billion unsolicited bid for generic drugmaker Perrigo Company (PRGO) to $32.7 billion, a move Mylan said its advisors Goldman Sachs says is well in line with the “sufficient resources” the company has to tender such an offer.
The new bid breaks down to $232.23 per Perrigo share, which represents a multiple of approximately 25x calendar year 2014 EBITDA (pro forma for Perrigo‘s recent acquisition of Omega Pharma), said Mylan, and will be a smart deal for both companies.
“With this enhanced offer, I look forward to meeting with Joe Papa and his team to finalize the implementation of this truly compelling combination, which is a win-win for both Mylan and Perrigo shareholders and all other stakeholders,” said Mylan Chief Executive Robert Coury in a statement.
On April 21, Perrigo said it had been rejected by the company, after Perrigo said late Tuesday that the offer “substantially undervalues” Perrigo and “its future growth prospects and “is not in the best interests of Perrigo’s shareholders.”
“Perrigo has a long history of driving above market shareholder value through consistent growth with a focus on profitability and operational excellence, which is reflected in our organic net sales CAGR goal of 5-10 percent for the next three years,” said Joseph C. Papa, chairman, president and chief executive, in a statement.
On April 8, Mylan made the $30 billion cash-and-stock transaction valued at $205 a share, a 25 percent premium to the company’s current trading price. News of the announcement initially sent share of Mylan shooting up, a move that caused market officials to halt trading. Dublin, Ireland-based Perrigo Co. had a share count of 147 million as of March 30. Mylan said its proposal was delivered to Perrigo‘s chairman on April 6, but that bid has now been rejected.
“With the acquisition of Omega Pharma, we are a top five global OTC company with a diversified portfolio, a leading market position in key franchises and a strong and established global distribution platform,” said Papa. “We will continue to capitalize on our durable competitive position by expanding our international platform organically and through future synergistic deals. These actions will advance our leadership in the global OTC marketplace.”
Coury attempted to shrug off those concerns about financing and possible anti-trust hurdles Wednesday, saying the companies would be careful to stay within the boundaries set by regulators.
“Previously, Mylan filed for U.S. anti-trust clearance, made a ‘hell or high water’ commitment with respect to obtaining this clearance and committed to a timetable for closing. We have also secured firm committed financing for our offer,” said Coury.
“All of this, together with today’s action, will result in a transaction that provides compelling value and maximum speed and certainty to Perrigo and its shareholders. Further, this is a transaction that can, and will, be completed and create a powerhouse company that will be an engine for growing shareholder and stakeholder value as Mylan has done consistently for many years.”
For its part, Mylan said the deal would create “significant operating synergies.”
“The combination of these highly complementary businesses would produce a company with critical mass in specialty brands, generics, over-the-counter (OTC) and nutritional products; a powerful commercial platform with reach across all customer channels,” said Mylan in a statement, “[As well as] an exceptional high-quality operating platform; and opportunities to generate enhanced growth and deliver significant immediate and long-term value and benefits for shareholders and the other stakeholders of both companies.”
Mylan execs said that the two companies’ management teams had been kicking around the idea of a merger for quite a while, and the resultant offer was “the culmination of a number of prior discussions between Mylan and Perrigo about the compelling strategic and financial logic of this combination.”
The deal would just be the latest shopping trip for Mylan, which has been attempting to build out its brand via bolt-on acquisitions, including women’s health specialists Famy Care and a massive $5.3 billion tax inversion acquisition of Abbott Laboratories (ABT). On Feb. 2 Mylan acquired several women’s health care business units from Mumbai, India-based Famy Care Limited. The deal was handled through Mylan Laboratories Limited, Mylan’s Indian subsidiary.
Still, for the refusal to come on the same day that Mylan had received its own solicited bid from Teva Pharmaceutical Industries Ltd. (TEVA), has many market watchers wondering what the next few months will hold for all three companies: Perrigo, Mylan and Teva.
Israeli company Teva said Tuesday will bid for Mylan at an unsolicited price of around $40.1 billion, in an $82 a share in cash and stock deal that would be the biggest takeover attempt so far this year. That bid is23 percent above Mylan’s closing price April 16.
Any eventual merger could mean more than $27 billion in revenue from the combined companies, although Mylan’s public rebuke of its suite April 17, in which it raised concerns about antitrust issues, continues to worry analysts.
Teva lost patent protection for multiple sclerosis drug Copaxone, for which Mylan makes a generic, last July after a U.S. Federal Appeals Court found the patent protecting the drug would expire in May 2014, not September 2015.
“The attraction for Teva is that this deal would immediately allow them to grow and reduce their exposure to the impending drop in Copaxone sales,” said Sam Fazeli, an analyst at Bloomberg Intelligence in London, told Bloomberg Tuesday. “We still would have to consider the ramifications of antitrust regulation.”
Rumors that Teva and Mylan are finally ready to merge have been roiling the market for months, but gained new urgency yesterday after people familiar with the matter told Bloomberg News they expect a formal bid from Teva for Mylan soon.
“Teva hasn’t made a formal approach yet, the people said, though Mylan is aware of the Israeli company’s interest,” said Bloomberg Monday. “Teva is evaluating the purchase internally and has also approached advisers about the potential bid and financing, the people said, asking not to be identified discussing private information.”
Earlier this month Mylan made an unsolicited $28.9 billion bid for Perrigo Co., a move which Wall Street has taken as a catalyst for Teva to pounce before Mylan becomes a larger, and much more expensive, target. Mylan has said, however, that it remains committed to its deal with Perrigo, refuting a Teva deal soundly in a statement on Friday.
“We have studied the potential combination of Mylan and Teva for some time and we believe it is clear that such a combination is without sound industrial logic or cultural fit,” Robert J. Coury, Mylan’s executive chairman, said.
Mylan does have a host of attractive assets that have been tempting to larger drugmaker, including recent clues from the U.S. Food and Drug Administration (FDA) that Mylan’s generic ANDA, which is a stand-in for Natco’s multiple sclerosis drug Copaxone. Umer Raffat, a biotech analyst at ISI Evercore, said Monday that Mylan is poised to receive approval for that drug, which would quickly be rushed to market.
“My base case continues to be that Mylan will get its Copaxone approved,” said Raffat, “and it intends to commercialize it at the time of market formation.”
April 29, 2015
By Riley McDermid, BioSpace.com Breaking News Sr. Editor