Mylan Rejects Teva’s $40 Bn Acquisition Proposal
Mylan N.V.’s board of directors has unanimously rejected the unsolicited expression of interest from Teva Pharmaceutical Industries, Ltd. to acquire Mylan, which was announced by Teva on April 21, 2015. Teva made a non-binding proposal to acquire all of the outstanding shares of Mylan N.V. in a transaction valued at $82.00 per Mylan share, in a stock-and-cash deal valued at approximately $40 billion that would create a combined company with 2014 pro forma sales of approximately $30 billion. The non-binding proposal by Teva follows Mylan’s proposal earlier this month to acquire Perrigo for $28.9 billion, a proposal that Perrigo formally rejected on April 21, 2015, and which Mylan officially made an offer on April 24, 2015. Teva’s proposal to acquire Mylan is conditioned on Mylan not acquiring Perrigo or pursuing another transaction.
“After thorough consideration, Mylan’s Board unanimously determined that Teva’s proposal grossly undervalues Mylan, and would require Mylan’s shareholders to accept what we believe are low-quality Teva shares in exchange for their high-quality Mylan shares in a transaction that lacks industrial logic and carries significant global antitrust risk,” said Mylan Executive Chairman Robert Coury in a company statement. “In addition, we also believe that the proposal does not address the serious challenges of integrating two fundamentally different and conflicting cultures under a Teva Board and leadership team with a poor record of delivering sustainable shareholder value. We believe that these challenges would make it very difficult to generate value from this combination for Mylan shareholders. Furthermore, the proposal contains nothing meaningful indicating why a combination with Teva would be in the best interest of Mylan’s employees, patients, customers, communities and other stakeholders. In summary, the Board determined that Teva’s expression of interest is not in the best interests of Mylan, its shareholders or other stakeholders, and we believe that this is only a mere attempt by Teva to frustrate and distract Mylan from its business plan and strategy.”
In a letter to Teva’s President and Chief Executive Officer, Erez Vigodman, dated April 27, 2015, Coury further amplified on the board’s decision to reject the proposal, citing an undervaluation of Mylan, a lack of new product or market positions resulting from a combined company, concerns over receiving regulatory approval of the deal without divestments, and cultural differences. Coury said this explanation was not intended to encourage further deal-making but was intended to provide an explanation of why Mylan has rejected Teva’s proposal. “You should not view this explanation as a negotiating position or a counter-offer; it is neither,” said Coury in his letter. “It is simply an explanation of the minimum criteria a proposal would need to satisfy before our Board would consider it worth pursuing.”
To that end, Coury said that Mylan’s board would not consider engaging in discussions to sell the company unless the starting point of the discussions is “significantly in excess of $100 per share.”
He further raised concerns about the value of combining the two companies. “Our geographic positions are largely the same and combining them would add significant complexity without adding meaningful exposure to new markets. Our portfolios carry substantial redundancy with thousands of overlapping products globally. Importantly, this overlap includes key pipeline products expected to drive growth in the near and long-term, including generic Advair, generic Copaxone, generic EpiPen Auto-Injector and several biosimilar products,” said Coury in his letter. “Further, Mylan and Teva bring each other little in terms of new capabilities. It is important to note that given the massive overlap between our companies, the synergizing of redundant or similar efforts and products will inherently have a major negative impact on the very growth prospects you are aiming to extract from Mylan. What will be left is a short-term financial pop and longer-term value erosion.”
Coury also pointed to cultural differences, concerns over management turnover at Teva, and the risk of combining the two companies given possible divestments to achieve regulatory approval of such a deal. “Mylan’s Board would not be willing to consider a sale of the Company unless a potential acquirer agrees at the outset to bear the entire regulatory risk,” said Coury in his letter. “The possibility of agreeing to sell the Company and then having the regulators block the transaction (see Time Warner Cable, whose transaction with Comcast was terminated just last week in light of significant regulatory concerns) is an unacceptable risk for our Company, shareholders, employees, patients, customers, our communities and other stakeholders, particularly given the strength of our platform and the positive trajectory of our Company.”
In a statement, Teva reiterated its interest in acquiring Mylan for an equity value of now approximately $43 billion. Teva’s President and CEO Erez Vigodman, said in a statement on April 27, 2015: “While we are disappointed that Mylan has formally rejected our proposal, the Teva Board and management team are fully committed to completing the combination of Teva and Mylan, and we stand ready to quickly complete a transaction that is compelling for both Teva and Mylan stockholders. We are eager to work with Mylan and its advisors to complete a transaction that will allow us to deliver the value inherent in the proposed combination to our respective stockholders, employees, patients, customers, communities and other stakeholders.”