Israel’s Teva Pharmaceutical Tuesday launched an unsolicited bid to buy Mylan for $40.1 billion in a transaction that would create a behemoth in generic drugs.
Teva’s cash-and-stock bid would quash an unsolicited bid by Mylan earlier this month to acquire Perrigo for $28.9 billion.
Teva said its bid amounted to superior value for Mylan shareholders compared with Mylan’s approach to Perrigo.
Under the offer, Mylan shareholders would receive a premium of 37.7 percent compared with the Mylan stock price of $59.57 prior to its April 8 bid for Perrigo, Teva said.
“Our proposal is compelling for both Teva and Mylan stockholders and other stakeholders,” said Erez Vigodman, chief executive of Teva.
The deal would provide Mylan stockholders with “the opportunity to participate in the significant upside potential of the combined company –- one that would transform the global generics space and leverage it to hold a unique leadership position in the pharmaceutical industry,” Vigodman said.
However, neither Perrigo nor Mylan have shown interest in the deals pitched by their would-be suitors.
Perrigo announced after the markets closed Tuesday that its board “unanimously rejected” the Mylan bid.
“The board believes the proposal substantially undervalues Perrigo and its growth prospects,” said Perrigo chief executive Joseph Papa in a statement. “Perrigo’s board believes that the company has a strong independent future.”
Mylan last week signaled strong opposition to a buyout by Teva after reports surfaced that a bid was in the works.
“We have studied the potential combination of Mylan and Teva for some time and we believe it is clear that such a combination is without sound industrial logic or cultural fit,” said Mylan executive chairman Robert Coury in an April 17 statement.
“Further, there would be significant overlap in the companies’ businesses and we believe that it is unlikely that any such combination could obtain anti-trust regulatory clearances.”
Coury said Mylan is “fully committed to its stand-alone strategy, including its proposal to acquire Perrigo.”
Mylan shares closed 8.9 percent higher at $74.07 Tuesday. Teva shares gained 1.4 percent at $64.16 and Perrigo shares dropped 2.7 percent to $192.82.
– Pharma deal craze –
The Teva bid marks the latest potential big merger in the global pharmaceutical industry.
The health care sector leads 20 industrial sectors in 2015 deals with nearly $160 billion worth of transactions, according to Dealogic data compiled on April 10.
Health care also led in 2014 with $430 billion in deals.
The scramble for assets has occasionally resulted in bidding wars, as when Actavis acquired Botox-maker Allergan for $66 billion, blocking the unsolicited campaign for Allergan by Canada’s Valeant Pharmaceuticals International.
About 50 percent of Teva’s 2014 revenues of $20.3 billion came from generics, with specialty drugs comprising the bulk of the remaining revenue and about $1 billion coming from a joint venture with Procter & Gamble for over-the-counter products.
Mylan garnered about 80 percent of its $7.7 billion in 2014 revenues from generics. It moved its headquarters to Amsterdam this year following the purchase of Abbott’s non-US speciality and branded generic drug business for $5.3 billion.
Teva said it would invest in the company’s combined $10 billion specialty pharmaceutical business and reap some $2 billion in annual savings on costs and taxes from combining operations. Combined revenues would be more than $30 billion.
In launching its own unsolicited campaign two weeks ago, Mylan argued that Perrigo, best known as the manufacturer of Sudafed, Claritin and other over-the-counter drugs, offered complementary assets.
An April 10 note from RBC Capital Markets highlighted the possibility of a Teva bid for Mylan, but said such a move would raise debate on whether Mylan merits the hefty premium that would be needed.
“It’s hard to imagine Teva going ‘hostile’ given the size and complexities that this deal would bring but we think it’s feasible Teva could, similar to Mylan, go public with interest and let shareholders decide, which we think makes sense,” RBC said.