Teva Makes Hostile Bid To Acquire Mylan

Teva Pharmaceutical Industries, the world’s largest generic drug firm, has proposed a $40 billion takeover of its fourth-ranked rival, Europe-based Mylan.

The Israeli drugmaker is offering Mylan’s shareholders a 50:50 combination of cash and stock at a 38% premium to Mylan’s early-April stock price. Teva is pitching the deal as an alternative to Mylan’s own unsolicited, and recently rejected, $29 billion bid for the generic drug maker Perrigo.

Mylan had not commented on Teva’s hostile offer as of late last week but did remark earlier about speculation that it might happen.

“Mylan is fully committed to its stand-alone strategy, including its proposal to acquire Perrigo,” Mylan Executive Chairman Robert J. Coury said. He argued that a combination of Mylan and Teva is “without sound industrial logic or cultural fit.”

Teva insists that its offer is the better option. “Our proposal would provide Teva stockholders with very attractive strategic and financial benefits and Mylan stockholders with a substantial premium and immediate value for their shares,” Teva CEO Erez Vigodman says.

Teva, which also makes brand-name drugs, is making the bid as it confronts generics competition for its top-selling specialty product, the multiple sclerosis drug Copaxone. On April 16, the Food & Drug Administration approved the first generic equivalent, developed by Sandoz and Momenta Pharmaceuticals. In 2014, Copaxone brought in $4.2 billion in sales, or 21% of Teva’s revenues.

The combination of Teva and Mylan would create a company having $28 billion in annual sales. Teva also estimates that it could reap $2 billion in annual cost savings through operational, manufacturing, and R&D efficiencies.

Coury argued that significant overlap in the companies’ businesses would jeopardize government antitrust clearances. But in a regulatory filing, Teva said it is confident that a transaction can be structured successfully, with “divestitures, as necessary.”

Some observers figure that Mylan’s bid for Perrigo, which it has yet to renew after Perrigo’s rejection, was simply an attempt to deter Teva. To win over Mylan, Teva will need to raise its offer price by about 10% and lower the stock portion, said S&P Capital IQ stock analyst Jeffrey Loo.