Perrigo rejects formal Mylan takeover offer

Perrigo on Friday rejected a formal takeover offer from its bigger generic drugs rival Mylan, escalating a three-way takeover battle as Mylan attempts to fend off an unsolicited approach from Israel's Teva Pharmaceutical.

The move is the latest development in a multi-party merger battle that has gripped the generic drug industry in recent weeks and could result in a significant consolidation of the sector's most important companies.

Mylan said on Friday that its cash and stock offer for Perrigo would see shareholders in the Ireland-based company receive $60 in cash and 2.2 Mylan shares for each of their own.

The offer, which Netherlands-incorporated Mylan said was fully financed, comes weeks after it first proposed a takeover of Perrigo, which makes cough medicines and allergy remedies.

At the time, Mylan did not specify the terms of an offer which it said would value Perrigo shares at $205 each.

However, Ireland-based Perrigo reiterated on Friday that Mylan's proposal "significantly undervalued the company."

The current value of Mylan's bid for Perrigo is distorted by the fact that Teva, the world's largest generic drugmaker, made its own bid for Mylan last week, pushing up its shares.

Depending on the date used to calculate Mylan's unaffected share price, the value of its offer for Perrigo differs.

Using closing share prices from April 7, the day before it unveiled its proposed offer, the Mylan offer values Perrigo at $191.05 a share and Perrigo's market capitalisation at $28bn.

Mylan said that Perrigo investors would control about 38.2 per cent of the combined entity under the terms of its deal.

Robert Coury, Mylan's executive chairman, said that the Perrigo offer demonstrated its commitment to a combination.

"Not only have we fully financed our offer and already incurred significant non-refundable financing fees, our offer also is cash confirmed and not conditional on due diligence. Additionally, we also have made a 'hell or high water' commitment to obtain US antitrust clearance," he said.

"While we are disappointed by the decision of the Perrigo board to reject our proposal without entering into discussions thus far, we are still hopeful and confident that we can engage with their board about our offer and how to best bring our organisations together," Mr Coury said.

Perrigo shares fell 2.3 per cent to $197, while Mylan shares rose 2.4 per cent to $75.50 in mid-morning New York trading.

Teva's unsolicited takeover bid for Mylan valued its shares at $82 each.

Mylan's offer for Perrigo on Friday is the strongest indication that it is not interested in being acquired by Teva, although the company's board has yet to express its view on the matter.

After Mylan made its formal offer, Teva said that its offer remained on the table.

An acquisition of Perrigo would give Mylan a big over-the-counter drugs business while also widening its portfolio of generic prescription medicines. Mylan said it expected a combination with Perrigo would result in at least $800m of annual pre-tax cost savings.

Perrigo last November bought Omega Pharma of Belgium for €3.6bn in a deal that catapulted the company into the top five producers of medicines sold direct to the consumer without a prescription.

Although management remains concentrated in Michigan, Perrigo moved its official headquarters to Dublin in 2013 after buying Elan of Ireland for $8.6bn. It is one of several US drugmakers to have relocated to the country in order to benefit from the lower Irish corporate tax rate.

Additional reporting by Andrew Ward in London

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