In Blow to Tel Aviv Stock Exchange, Pharma Jewel Mylan to Delist Shares

Israeli institutional investors increased their holdings in Mylan after realizing its advantages over Teva. Its shares account for 7% of the total TASE value

Mylan NV EpiPen 2-Pak medication sits on a table inside a pharmacy in Provo, Utah, U.S., on August 31, 2016.
George Frey/Bloomberg

Mylan, the most valuable company on the Tel Aviv Stock Exchange, announced on Friday that it will voluntarily delist its shares from the TASE in February 2018. The pharmaceutical company, whose shares account for 7% of the value of the TA-35 index, committed to maintaining the listing for at least one year when it listed its shares on the TASE in November 2015, as part of its failed bid to acquire rival drugmaker Perrigo.

For the TASE, the announcement heralded the biggest blow since the delisting of Mellanox in 2013.

“Over the last two years, we have learned that many of our Israeli institutional shareholders actually hold their shares in Mylan on the Nasdaq,” Mylan Chairman Robert Coury said. “Further, Mylan’s holding on the TASE represents less than 3.5% of our total shareholdings and the average trading volume on the TASE is less than 3.5% of our global trading volume. Given these factors and the fact that the TASE’s trading hours and days are different from other markets, our board of directors decided at this time that it would not be in Mylan’s best interests to continue our listing on the TASE. That said, we do appreciate the ties we have forged with the Israeli institutional market,” he said.

Coury continued, “More importantly, over the last two years, I have had the privilege of becoming acquainted with the dynamic Israeli business environment and the strong work ethic of its people. As a result, we remain committed to considering future investments and other business development opportunities in Israel.” His comments echoed those he made in February 2016, on his second visit to Israel, shortly after Mylan was listed on the TASE.

He said then that he was committed to the TASE and that he was proving this. “I think the listing should be limited in time. I will be involved in developing business in Israel and we’ve already started investigating investment opportunities. We intend to set up a subsidiary here as well. The only negative aspect I see in operating here is that Israel is a small country, but this doesn’t really matter in light of the level of intellect and technology here,” he said. As far as is known, these festive words were not expressed in any significant investments here.

Unbalanced Stocks on the TA-35 Index

8.5% of the Tel Aviv stock market

Mylan was listed for trade in Tel Aviv in November 2015, as part of a failed attempt to convince institutional investors in Israel who held shares in Perrigo pharmaceuticals to support Mylan’s offer to buy Perrigo. Mylan committed to list its shares for trading in Tel Aviv for at least one year. Mylan’s offer was rejected by Perrigo’s shareholders by a majority of 60%, largely due to the position taken by Israeli institutional investors. This decision turned out to have been a mistake, since Mylan offered $75 million in cash and 2.3 Mylan shares for each Perrigo one. The current value of the offer is $162.8 million, a premium of 86% on the current value of Perrigo shares.

Israeli institutional investors have increased their holdings in Mylan since then after realizing that the quality of management there is significantly better than at Teva. They currently hold 8% of the company’s capital, worth 5.6 billion shekels ($1.59 billion) at the end of August. Mylan has in recent months become the highest valued stock in Israel, after the collapse of Teva. It is now traded at a valuation of 70.6 billion shekels, as of closing time on Thursday and before a cumulative 2.5% rise on Nasdaq. Perrigo traded at a value of 45 billion shekels and Teva at 46.5 billion shekels.

The market value of Mylan comprises 8.5% of the total value of stocks and convertible securities on the TASE. The average trading in Mylan shares was 36 million shekels last month, which is 3.5% of the average trade in stocks and convertibles on the exchange.

Mylan makes up 7% of the TA-35 index and 5% of the TA-125 index. Delisting it is expected to change these indices and lead to an increase in the purchase of mutual funds and ETFs that follow these indices, and to an exchange of these shares for others in the same indices.

Along with the expected hit to the volume of trade on the TASE there is a positive aspect to the delisting of Mylan – a better balance in the TA-35 index, which has suffered from a bias toward shares of pharmaceutical companies. The combined weight of the four largest companies traded on the TASE Mylan, Teva, Perrigo and Opko was 22% of the index. This exposed the index to the fluctuations in the valuation of these companies in the United States, thus making it nonrepresentative of financial activity in Israel.

The CEO of the Israel Association of Publicly Traded Companies, Ilan Plato, said in response to Mylan’s announcement that “Mylan’s delisting is a painful blow to the efforts to revive activity on the exchange and it will certainly reduce the volume of trade and increase the liquidity trap on the Israeli market. We repeat our call to the Finance Ministry and the Tax Authority to take operative steps to encourage trade and reduce taxation of profits in the stock market.”