Mylan rounds on Teva as it rejects $40bn bid

Mylan has rejected a $40bn takeover bid from Israel's Teva, a generic drugs rival double its size, and confirmed its pursuit of cough remedies maker Perrigo in the latest stage of the three-way takeover battle on Monday.

In a strongly worded letter to Teva's chief executive, Mylan's chairman Robert Coury said that the Israeli company's proposal had grossly undervalued Netherlands-domiciled Mylan and carried significant global antitrust risk.

"The proposal contains nothing meaningful indicating why a combination with Teva would be in the best interest of Mylan's employees, patients, customers, communities and other stakeholders," said Mr Coury.

"Teva's expression of interest is not in the best interests of Mylan . . . and we believe that this is only a mere attempt by Teva to frustrate and distract Mylan from its business plan and strategy," he said.

Mylan's shares dropped 5.6 per cent to $71.86 after it rejected the offer from Teva, whose shares fell about 3 per cent.

Last week, Mylan detailed a cash and stock offer for Perrigo, but the Ireland-based company swiftly rejected the proposal, which it said "significantly undervalued the company".

After Mylan's rejection, Erez Vigodman, Teva's chief executive, said that his company remained committed to its evenly split cash and stock offer of $82 per share, a 48.3 per cent premium to Mylan's unaffected stock price on March 10.

Mr Vigodman defend Teva's offer, maintaining that it made strategic sense and adding that regulatory clearances for the proposed deal were already under way.

"While we are disappointed that Mylan has formally rejected our proposal, the Teva board and management team are fully committed to completing the combination of Teva and Mylan," Mr Vigodman said.

"We stand ready to quickly complete a transaction that is compelling for both Teva and Mylan stockholders."

However, completing a hostile deal will be tough for Teva. Mylan, which moved its domicile to the Netherlands this year, has introduced a powerful poison pill defence.

Mylan accused Teva of having a "dysfunctional" management and culture that had caused the company's shares to sharply underperform its peers and the broader stock market.

It said that Teva had "churned" through three chief executives since 2007, and "[run] out of town" within 18 months the only one of those with experience of the global pharma industry.

This was a reference to the 2013 ousting of Jeremy Levin, a former top executive at Bristol-Myers Squibb, after a clash with the board.

Activist investors have long accused Teva of weaknesses in corporate governance and poor shareholder returns, highlighting a shortage of people with drug industry experience among the Israeli-dominated board.

Teva says that it has overhauled corporate governance since Mr Vigodman took over as chief executive last year and Yitzhak Peterburg replaced Phillip Frost as chairman.

However, in its letter, Mylan said that Teva had no record of delivering shareholder value after a decade of "flip-flopping strategy".

It contrasted its own 247 per cent increase in share price over the past three years with Teva's 42 per cent rise, and said that its rival's performance was likely to get worse after the looming patent expiry for Copaxone, the multiple sclerosis treatment that accounts for a fifth of Teva sales.

Additional reporting by Arash Massoudi in London

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