Mylan offers $28.9bn for Perrigo to bury Teva rumour

The flurry of M&A news this year shows no signs of abating, with Mylan proposing a $28.9 billion deal to acquire Ireland’s Perrigo and create a powerhouse in generic and speciality pharmaceuticals.

The $205-per-share overture comes shortly after US-based Mylan was linked to a possible takeover by Teva and could be seen as a defensive move, as combining with Perrigo will probably make Mylan too big for its Israeli counterpart to swallow.

Mylan said the businesses would complement each other, and the merger would produce a company with critical mass in speciality pharmaceuticals, generic drugs, and over-the-counter (OTC) and nutritional products. To date, Mylan has not been active in the consumer health sector.

The combined company would have posted 2014 sales of around $15.3 billion, said Mylan chairman Robert Coury, who suggested the offer came on the back of “a number of prior discussions between Mylan and Perrigo about the compelling strategic and financial logic of this combination”.

Perrigo said it had received an “unsolicited, indicative proposal” from Mylan, which, under Irish takeover laws, cannot be construed as a firm offer for the time being.

Both companies have made significant acquisitions themselves in recent months. Mylan completed the purchase of Abbott’s generics unit earlier this year for $5.3 billion – allowing it to shift its domicile to the Netherlands and reduce its tax burden – while Perrigo splashed out $4.5 billion on OTC specialist Omega Pharma, having also bought Elan for $8.6 billion in 2013.

Both companies enjoyed solid revenue and earnings growth in 2014 and are considered to be well-positioned for organic growth, lending weight to the notion that the proposed merger is a defensive strategy whilst also allowing further tax cuts.

Under the terms of the proposed deal, Coury would serve as co-chairman for the combined company alongside Perrigo chief executive Joseph Papa. Mylan’s current chief executive Heather Bresch and president Rajiv Malik would retain their current roles.

Meanwhile, Teva – which posted 2014 sales of a little over $20 billion – has promised shareholders it will spend some of its cash reserves this year to help grow the business, and is in the throes of buying Auspex for $3.5 billion.

The news of Mylan’s offer has already triggered speculation that the Israeli company may consider a rival bid for Perrigo, while Canada’s Valeant has also been mentioned in dispatches.

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