Teva offers to buy Mylan for around $40.1 billion

Teva announced Tuesday a proposal to acquire Mylan for $82.00 per share, or around $40.1 billion, comprised of approximately 50 percent cash and 50 percent stock. Teva CEO Erez Vigodman remarked that the offer "is compelling for both Teva and Mylan stockholders," adding the company would welcome an opportunity to meet with Mylan's board to discuss a potential deal.

The Israeli drugmaker noted that the proposal is "a more attractive alternative" to Mylan's recent non-binding unsolicited offer to acquire Perrigo for $205 per share in cash and stock, or a total of about $28.9 billion. Teva stated that its proposal is contingent on Mylan not consummating its offer to acquire Perrigo (for further analysis, see ViewPoints: Mylan begins courting Perrigo – is offence its best defence against Teva?) Later on Tuesday, Perrigo's board rejected Mylan's proposal, saying that the offer "substantially undervalued" the company.

According to Teva, a combination with Mylan "would create a leading company in the pharmaceutical industry, well positioned to transform the global generics space." Vigodman said "we have long respected Mylan's business," adding "as one company, we would have the infrastructure and capabilities to faster pursue a differentiated business model, fully integrating specialty and generics drugs with products, devices, services and technologies."

Teva indicated that the combined company would have generated annual sales of around $30 billion last year, with earnings of approximately $9 billion. The Israeli drugmaker also noted that there would be "opportunities for substantial achievable cost synergies and tax savings," which are estimated to be approximately $2 billion annually. Teva added that the proposed transaction, which is expected to be accretive to earnings in its first year, could be completed by year-end 2015.

Teva said its offer represents a 48.3 premium to Mylan's stock price on March 10, the day before rumours of a transaction between the companies surfaced. In response to more recent speculation on a deal, Mylan executive chairman Robert Coury, who expressed the company's desire to remain independent, questioned both the fit of the companies and whether regulators would approve such a merger. Mylan relocated its domicile to the Netherlands last year via its $5.3-billion acquisition of Abbott's developed markets branded generics business, and the company recently enacted a mechanism under Dutch law that would make a takeover more challenging.

Vigodman, who stated that Teva was "disappointed" that Mylan "prematurely addressed a potential combination," suggested that any regulatory requirements concerning a merger between the firms "will be met in a timely manner." Commenting on regulatory concerns, Bloomberg Intelligence analyst Jennifer Rie said "pharma companies are very sophisticated on antitrust and they know what they need to divest to get the deal through." Rie added "chances are great that Teva has a very good idea what will have to be sold off." For related analysis, read ViewPoints: Agree to disagree – will FTC considerations scupper a Teva-Mylan deal?

Mylan is among the companies developing generic versions of Copaxone, which generated $4.2 billion in sales last year. Earlier this month, the FDA approved the first generic version of the multiple sclerosis therapy, which will be marketed by Novartis' Sandoz unit and Momenta Pharmaceuticals as Glatopa (for related analysis, see The Q&A – At long last…the FDA approves generic Copaxone – the key questions). Meanwhile, Teva is among the companies developing a generic version of Mylan's EpiPen.

"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," remarked Bloomberg Intelligence analyst Sam Fazeli (for related analysis, see ViewPoints: Approval of generic Copaxone will sharpen focus on Teva's M&A efforts). Further, Gabelli & Co. analyst Kevin Kedra noted that Mylan also has biosimilar medicines, injectable drugs and antiviral therapies "that Teva would certainly like to add into their business or expand on." Kedra remarked that the proposed purchase of Mylan makes sense, though a Mylan acquisition of Perrigo can also be justified, adding "I'm not willing to handicap which way it’s going to go."

While announcing the company's fourth-quarter results earlier this year, Vigodman expressed that the Israeli company could pursue inorganic moves to bolster growth. In March, Teva reached an agreement to purchase Auspex Pharmaceuticals for approximately $3.2 billion in cash. For related analysis, see ViewPoints: Will an eagle-eyed Teva be back on the M&A trail soon?

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