Mylan, Perrigo Notch Wins in Their Takeover Fight
Mylan in April publicly bid for Perrigo, saying a combination would create a strong competitor in the quickly consolidating pharmaceuticals sector. Perrigo has rejected the price as too low.
Perrigo got some fuel Friday morning, when proxy adviser Institutional Shareholder Services Inc. recommended Mylan shareholders deliver a “no” vote, saying there were too many hurdles to a deal.
Hours later, a large investor, hedge-fund firm Paulson & Co., said it had voted its 4.6% Mylan stake in favor of a Perrigo takeover.
In an interview, John Paulson, the firm’s founder, said Mylan was offering “pretty full value” for Perrigo and extolled what he saw as the deal’s merits. “The generics space is a very fragmented industry and there’s a need for consolidation,” he said. Mr. Paulson’s firm on Friday disclosed a 1.5% stake in Perrigo.
Mylan has made a technical move that eases the way for its takeover bid. On Thursday, it said it lowered its bar for the deal, saying that rather than needing support of 80% of Perrigo shares to close the transaction, a simple majority would suffice.
“We are confident that acquiring Perrigo is the right next strategic step for Mylan and its shareholders in continuing to deliver on our stellar track record of creating significant and sustained value for our shareholders,” Robert Coury, executive chairman, said in a statement Friday.
Two other proxy firms, Glass, Lewis & Co. and Egan-Jones Ratings Co., have come out in support of the deal, though ISS is generally considered more influential in contested corporate votes.
In an interview, Perrigo CEO Joseph Papa said the bid price, which has fallen amid a slide in Mylan’s shares, is too low, and criticized Mylan’s decision to lower the threshold.
“We are a shareholder-friendly company and not opposed to deals, but they would have to be at an appropriate value for our shareholders,” he said. “We don’t believe this is even close.”
Mylan and Perrigo are both generic-drug makers, but focus on different segments of the market. Perrigo makes cold and allergy medicines and infant formulas, including some sold under chain brands at Walgreens Boots Alliance Inc. and Wal-Mart Stores Inc.
Mylan concentrates on generic drugs, but is best-known for its branded EpiPen allergic-reaction treatment, which may soon face pressure from potential competitors.
Their jockeying comes ahead of the transaction’s first real test: an Aug. 28 meeting where Mylan shareholders will vote on a stock issuance to fund the takeover.
Even with ISS’s recommendation, Mylan is seen as likely to win that vote. Its largest shareholder, Abbott Laboratories at 14.5%, has said it would support the transaction.
Mylan shares closed up 14 cents Friday at $54.36. Perrigo shares rose $3.50, or 1.8%, to $196 after The Wall Street Journal first reported Paulson’s stake, reversing earlier losses.
Mylan first bid $205 a share, or about $29 billion, for Perrigo in April, an offer it later raised to about $36 billion in a mix of cash and stock. The chase was complicated when Teva Pharmaceutical Industries Ltd. bid for Mylan. But Teva bowed out last month, leaving Mylan and Perrigo locked in battle.
If Mylan’s shareholders approve the share issuance later this month, the company plans to launch a tender offer, taking its bid directly to Perrigo’s shareholders and bypassing the board.
The potential takeover comes amid rapid-fire deal-making in the pharmaceutical sector, including generics companies. Last month, Teva agreed to pay $40.5 billion for the generics business of Allergan PLC, which was itself formed by the March merger of Allergan, the U.S.-based maker of Botox antiwrinkle treatment, and Ireland’s Actavis.
Several approaches have been unsolicited, including Mylan’s for Perrigo, Teva’s for Mylan, and Shire PLC’s for Baxalta Inc., a $30.6 billion bid lobbed last week.
The lower threshold that Mylan introduced Thursday carries its own complications. Irish law requires 80% to take companies entirely private, which raises the possibility that Mylan would be stuck as a large shareholder in Perrigo with no certain path toward owning the rest.
A win with less than 80% could limit its ability to cut costs and use Perrigo’s cash for other purposes, an outcome that ratings firm Moody’s Investors Service said would put “downward pressure” on Mylan’s investment-grade rating, which Mylan has said it is committed to keeping.
At the same time, Perrigo shareholders might be reluctant to be minority owners in a Mylan-controlled Perrigo, and for that reason could ultimately decide to tender their shares.
Updated Aug. 14, 2015 6:31 p.m. ET
Write to Liz Hoffman at [email protected]
Source: Wall Street Journal Health
