Mylan’s Formal Offer For Perrigo Will Heat Up Pharma Dealmaking

Mylan on Friday morning unveiled its formal offer for Irish-domiciled drugmaker Perrigo, offering $60 a share in cash and 2.2 million Mylan shares, valuing the target at around $220 a share at current prices or $31 billion. The move comes as the generic drugmaker works to fend off a $40 billion takeover bid from its competitor, Teva Pharmaceuticals.

Included in Mylan’s offer were also financial details on the benefits it sees from remaining independent and cutting deals to boost its earnings growth. Mylan says it expects a merger with Perrigo will result in at least $800 million in annual pre-tax operational synergies by the fourth year after a deal’s close. The merger, Mylan said, will also be immediately to its earnings per share on a “fully-synergized basis” and said that its free cash flow will allow for rapid de-leveraging. It expects to maintain an investment grade rating.

Mylan CEO Heather Bresch said of the deal, “the combination of Mylan and Perrigo demonstrates clear and compelling industrial logic and will generate significant value for customers, patients, employees, stockholders and other stakeholders through the creation of a one-of-a-kind global healthcare company that has complementary businesses and cultures, unmatched scale in its operations, one of the industry’s broadest and most diversified portfolios, and immense reach across distribution channels around the world.”

In addition to securing committed debt financing from Goldman Sachs and a bid that is not conditional on due diligence, Mylan executive chairman Robert Coury added Mylan has made a “hell or high water” commitment to win U.S. antitrust clearances.

Mylan’s formal and improved offer comes weeks after the company indicated it was willing to pay $205 a share for Perrigo, an offer that was quickly dismissed. Perrigo’s on Friday rejected Mylan once more, stating it is not in the best interests of shareholders and is actually a lower price than the initial bid when Mylan shares traded at $55.31 on March 10.

In the background is Teva Pharmaceuticals, which is pressing a takeover of Mylan, but says its offer assumes the Perrigo deal doesn’t go through. On Tuesday, it offered Mylan a $82 a share cash takeover offer, a deal that Mylan characterized as speculative, underpriced and carrying large antitrust hurdles.

About Mylan’s formal Perrigo offer, a Teva spokesperson said, “the Teva Board and management team remain fully committed to completing its value-creating combination of Teva and Mylan. Teva’s proposal to acquire Mylan for $82.00 per Mylan share provides Mylan stockholders with a significant premium and immediate value for their stock as well as the opportunity to participate in the significant upside potential of a financially and commercially stronger combined company. Our proposal for Mylan implies a total equity value of approximately $43 billion and an enterprise value of approximately $50 billion.”

Mylan shares were trading higher by 2.3%, while Perrigo shares were trading over 2% lower. Teva shares were trading 1.5% higher.

Source: Forbes Health