Mylan targets Perrigo shareholders in latest generics mega-merger attempt

Mylan has been looking to acquire generics and OTC drugmaker Perrigo since it launched a hostile bid in April​. Last week Mylan said in a letter “shareholders will receive $75 per share in cash, and own approximately 40% of the new powerhouse company created by the combination,”​ and today has formalised this offer, which values Perrigo at just over $27bn (€24bn).

But in this ongoing saga, Perrigo CEO Joseph Papa said the offer is “neither compelling, nor accretive,”​ in a response to Mylan Executive Chairman Robert Coury.

“It is not compelling because it substantially undervalues Perrigo and provides a meagre change of control premium at best – in fact it is the lowest change of control premium of any biopharmaceutical deal valued over $5bn since the start of 2012,”​ he wrote.

“And by your own admission, Mylan does not expect this offer to be accretive until ‘year four’ and then only if Mylan's synergy estimates are fully realized.”​

Misleading statements​

Papa also lambasted a series of “misleading statements”​ in Coury’s letter, including the conception that Perrigo is not at any price or on any terms.

“Perrigo has never refused to engage with you, but your offers have simply not been a basis for discussions,”​ he said, adding: “You chose to pursue this path in April with an unsolicited offer rather than engagement, and you alone have chosen the price to offer our shareholders. ​

“Any attempt now to shift the blame for failing to give our shareholders better value is disingenuous and only highlights the inadequacy of your offer.”​

The escalating correspondence is reminiscent of the heated exchanges between Mylan and Teva earlier this year, during a period where the Israeli Generics Giant was looking to acquire Mylan for around $40bn.

Coury accused Teva’s CEO​ of making “noncommittal, unclear, inaccurate”​ statements about his company and causing “significant unrest and uncertainty.”​ Teva withdrew its offer in July​, after inking a deal to buy Allergan’s generics business for $40.5bn.

Hands of the shareholders​

With the Mylan-Perrigo deal, both Coury and Papa agree that any decision is now in the hands of Perrigo shareholders.

“I have spoken with the majority of them, many of whom are also Mylan holders,”​ Papa said, “and these conversations, as well as the results of your ‘overwhelming majority’ vote (which in fact was only 51% of your own shares outstanding or, in other words 49% of your shareholders did NOT vote for this transaction), only reinforces our view that Perrigo shareholders will not tender into your value destructive offer.”​

Financial analysts too are largely of the opinion that Perrigo would be better off as a standalone company, with David Maris of BMO Capital Markets saying in a note “several trends in Mylan’s performance and several overhang issues may represent an increased risk to Perrigo shareholders if a deal is completed.”​

Citi analyst Liav Abraham, meanwhile, wrote the arguments put for the by Papa “are supported by facts, and clearly and rationally highlight the strategic and financial issues associated with a potential combination of the two companies, in our view.”​