As Mylan N.V. waits for a special shareholder meeting, scheduled for later this month, to vote on its takeover bid of Perrigo, Mylan has formally lowered its tender threshold. Mylan said that it had lowered the acceptance condition for its offer to acquire Perrigo from not less than 80% of Perrigo ordinary shares to greater than 50% of Perrigo ordinary shares. As previously announced, on August, 6, 2015, Mylan entered a second amendment to its bridge credit agreement that allows Mylan to lower the acceptance condition to a number of Perrigo ordinary shares representing more than 50% of the voting rights then exercisable at a general meeting of Perrigo without further consent from the lenders.

On April 24, 2015, Mylan issued a Rule 2.5 announcement (amended on April 29, 2015) under the Irish Takeover Rules setting forth its legally binding commitment to commence an offer directly to the Perrigo shareholders for the entire issued and to be issued share capital of Perrigo. The proposed transaction remains subject to the pre-condition and certain conditions and other terms set forth in the formal Rule 2.5 announcement.

Following this decision by Mylan, the acceptance condition set out in the Rule 2.5 announcement is therefore in respect of valid acceptances being received in respect of Perrigo shares affected (within the meaning of the Rule 2.5 announcement) representing greater than 50% in nominal value of the maximum Perrigo shares affected (within the meaning of the Rule 2.5 announcement), which carry, or if allotted and issued, or re-issued from treasury would carry, greater than 50% of the voting rights attaching to the maximum Perrigo shares affected.

Perrigo was highly critical of the move to lower the acceptance rate of target investors to greater than 50% rather than the original threshold of 80%. Perrigo Chairman, President and CEO Joseph C. Papa said in a company statement: “Mylan already proposed a dilutive deal that substantially undervalues Perrigo; today’s announcement makes it even worse. This scare tactic is simply an attempt to coerce Perrigo shareholders into a value destructive deal. We don’t believe Perrigo shareholders will tender into this transaction at any threshold and we are confident that there is no rational path to a full acquisition of Perrigo… “This reckless action runs contrary to the best interests of both Perrigo and Mylan shareholders, taking a value-destructive transaction and making it materially worse when Mylan fails to achieve the 80% threshold necessary for consolidation.

Separately, Mylan responded to a report issued by Institutional Shareholder Services (ISS) , a proxy advisory firm, regarding Mylan’s proposed acquisition of Perrigo; ISS was critical of the proposed acquisition and advised against the deal. Mylan said that other proxy advisory firms, Glass Lewis and Egan-Jones, earlier issued reports recommending Mylan shareholders vote in favor of the Perrigo transaction.

Mylan’s Executive Chairman Robert J. Coury commented in a company statement: “While today’s report from ISS repeatedly recognizes the clear industrial logic and solid business strategy of combining Mylan and Perrigo, it misunderstands and/or underestimates, without a meaningful basis, many other key aspects of the transaction. In particular, ISS fails to comprehend the potential for medium and long-term value creation for Mylan shareholders, the compelling synergy opportunity, the potential for meaningful multiple expansion and the ability to take advantage of the continuing consolidation in our industry.

Mylan reiterated its interest in acquiring Perrigo. It said that if the deal proceeds, it expects that it would be able to achieve at least $800 million of annual pre-tax operational synergies by the end of year four, substantial free cash flows, and meaningful multiple expansion. The company also noted that Abbott Laboratories, Mylan’s largest shareholder owning approximately 14.25% of Mylan’s outstanding shares, has announced its intention to vote in favor of the acquisition.

In commenting on the ISS report, Perrigo’s Papa agreed with the findings and reiterated Perrigo’s rejection of a deal. “The ISS recommendation is consistent with our view that Mylan’s offer would be value destructive and that Perrigo and Mylan holders alike should not support this transaction. As we have said since April, Mylan’s offer substantially undervalues Perrigo and is not in the best interests of our shareholders. Following Mylan’s action to recklessly lower the acceptance threshold, which makes an already value destructive deal even worse, this transaction exposes shareholders to dilution, enhanced risk and a questionable synergy target. The report also underscores Mylan’s poor corporate governance track record. Ultimately, we do not believe that Perrigo shareholders will tender into this transaction—whether at 80% or 50%—and ISS’s recommendation only further reinforces our view that Mylan’s approach demonstrates an act of desperation as there is no rational path to a full acquisition of Perrigo.”

Mylan will hold a special shareholder meeting to vote on the proposed transaction on Friday, August 28, 2015.

Source: Mylan (Perrigo offer),  Mylan (ISS), Perrigo (tender threshold), and Perrigo (ISS)