Shire and Mylan both face obstacles on takeover plans


Shire and Mylan - both in the throes of unsolicited takeover bids - have hit hurdles that threaten to derail their plans.

In the case of Shire, the UK-listed company is trying to persuade Baxalta to give it access to its accounts before committing to raise its $30 billion bid, although Baxalta has so far refused to comply, leading to an impasse.

Meanwhile, Mylan's $36 billion takeover bid for Ireland's Perrigo has been threatened by a recommendation from advisory company Institutional Shareholder Services (ISS) that Mylan's investors vote against pursuing the deal at a meeting scheduled for 28 August.

Shire has been trying hard to push the case for combining the two businesses to Baxalta's shareholders for the last couple of weeks, although the US company's management remains staunchly opposed to the move at the current price.

The company maintains that Shire approach is too low and opportunistic given that it has only just separated from former parent Baxter, and its share price has not reach equilibrium. It also says its haemophilia business is growing faster than expected, so it warrants a higher valuation.

While Baxalta has intimated a higher bid may at the very least entice it to the negotiation table, a reluctance to provide access to its financial data could scupper the process.

Both sides are claiming Baxalta's shareholders are supporting their position, with Shire insisting that the combined operation would be a powerhouse in rare disease therapies and post sales of $20 billion a year by 2020.

Baxalta has just published second-quarter results with the Securities & Exchange Commission (SEC) in the US, revealing a small dip in net sales to $1.43bn from $1.45bn a year ago, which it attributed largely to unfavourable exchange rates. Shire's revenues were $2.89 billion in the first six month of the year.

Meanwhile, Mylan's attempt to buy Perrigo has "unreasonable uncertainties" including that Perrigo's shareholders may reject the offer, according to ISS, although the advisory firm did indicate there were sound reasons for combining the two businesses.

Mylan's shareholders may also find the price too rich to stomach, said ISS. Mylan's plans did get a boost at the end of last week however when it emerged that a shareholder with a 4.6 per cent stake in the firm - hedge-fund firm Paulson & Co - had pledged to support the deal.

The hedge fund's founder John Paulson told the Wall Street Journal that the generics sector remains very fragmented and there is "a need for consolidation."

Andrew McConaghie

17 August, 2015