Markets Breathe Sigh of Relief After Mylan’s Perrigo Bid Fails

Mylan shares soar after it failed to win backing from more than 40% of Perrigo shareholders.

Perrigo headquarters in Bnei Brak, Israel.
Perrigo headquarters in Bnei Brak, Israel.Credit: Hadar Cohen

The $66 billion ménage a trois between Teva Pharmaceuticals, Mylan and Perrigo came to end on Friday with none of the companies pairing off with any of the others.

Teva abandoned its $40 billion hostile bid for Mylan in July and instead agreed to buy the generics business of Allergan. On Friday, Perrigo’s shareholders rejected Mylan’s $26 billion hostile bid for their company, ending the Netherlands-based generic drug maker’s seven-month pursuit.

The offer by Mylan, which it originally undertook to make itself too big for Teva to swallow, expired on Friday with just 40% of Perrigo shares tendered, below the required minimum 50%, ensuring victory for Perrigo CEO Joseph Papa.

Teva was the only company of the three headquartered in Israel, but Perrigo has extensive operations in the country, trades on the Tel Aviv Stock Exchange and is about 12%-owned by Israeli investors. Mylan listed itself on the TASE last month as part of its campaign to enlist shareholder support for its Perrigo bid.

The markets breathed a sigh of relief vis a vis Mylan, whose TASE share prices – tracking its trading in Nasdaq on Friday – ended up 10.4% at 192.70 shekels ($49.59). Perrigo, however, slumped 8.4% to 579 shekels, making it’s the biggest loser of the day and the most actively traded stock.

Nevertheless, analysts said both companies could now look forward to a brighter future apart than as a single company or worse still, in a state of limbo, which Perrigo would have found itself in had Mylan won the backing of more than 50% and less than 80% of Perrigo shareholders. That would have left it as a separate company but controlled by Mylan.

“The Mylan-Perrigo deal was expected to be one with not a lot of value but a lot of risk,” said Nir Hatzav, an analyst at Oppenheimer Israel, noting that even Mylan admitted it would not add to earnings per share until the fourth year.

Perrigo can re-enter the mergers and acquisitions arena with much less uncertainty, increasing the odds of a mid-sized to large deal, Jefferies analyst David Steinberg wrote in a note. Reuters reported on Thursday that Perrigo, a U.S. company domiciled in Ireland, had held talks with Endo International, another Ireland-based drug maker.

To convince investors to rebuff Mylan’s offer, Perrigo had announced job cuts and a $2 billion share buyback plan last month. Perrigo said on Friday it would immediately start buying back shares, helping pull its stock off a more than one-year low.

Hatzav said that at their depressed level, Mylan shares were now attractive. In the months that the Mylan bid was on, Perrigo stock was trading at a 460-point premium to the S&P 500 pharma sector; that’s now been cut to 170 points, he said.

Mylan first made public its interest in Perrigo in April and went hostile in September, offering $75 plus 2.3 of its shares for each Perrigo share held. Based on Mylan’s Thursday close, the offer worked out to about $174.36 a share for Perrigo versus a Friday close of $146.90.

On Friday, Mylan Executive Chairman Robert Coury said his company was well positioned to “quickly execute on the next strategic, value-enhancing opportunities.”

But Raymond James analyst Elliot Wilbur said he didn’t expect any deals soon. “Mylan won’t necessarily be immediately opening up its checkbook for the next company it can buy and instead will step back, take a breather and focus on the companies or assets it should buy,” he wrote in a note.

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