Perrigo's board calls on shareholders to reject Mylan's tender offer

Perrigo announced Thursday that its board of directors unanimously decided that Mylan's unsolicited tender offer of $75 in cash and 2.3 Mylan shares for each Perrigo share "substantially undervalues" the company and does not adequately compensate shareholders for its "exceptional growth prospects." As such, Perrigo recommended that shareholders not tender any of their shares to Mylan.

"Mylan's offer not only fails to reflect Perrigo's outstanding track record of value creation, it also undervalues our compelling prospects for continued growth and sustainable, long-term shareholder value," Perrigo stated. Specifically, the drugmaker said it anticipates organic growth of 5 percent to 10 percent for its global base business, helped by an estimated $1 billion in new product launches over the next three years, in addition to "significant upside" as a result of more than $29 billion in future switches from prescription drugs to over-the-counter alternatives. Perrigo also indicated that it expects upside from potential M&A opportunities, as previously suggested by CEO Joseph Papa.

In addition, Perrigo pointed out that Mylan has acknowledged that a merger with Perrigo would be dilutive to earnings for at least three years even if synergy targets are fully realised. The drugmaker also questioned Mylan's ability to achieve its synergy target of at least $800 million given "the limited operational similarities between the two companies." Further, Perrigo argued that the offer provides "significant financial risks" to its shareholders as it expects Mylan's stock to face negative pressures moving forward.

Perrigo's board had already dismissed Mylan's offer in April as inadequate, saying the bid was lower in value than a prior rejected non-binding proposal of $205 per share in cash and stock.

Mylan's attempt to acquire Perrigo received the support of more than two-thirds of its shareholders at an extraordinary general meeting last month, even though Institutional Shareholder Services, which cited "unreasonable uncertainties" about the bid, had urged them to oppose the transaction. Abbott, which is Mylan's largest shareholder, previously expressed that it would tender its 14.5-percent stake in Mylan in support of the acquisition.

Although analysts had suggested that Mylan could have "less leverage" to acquire Perrigo after Teva abandoned its own pursuit of Mylan, industry insiders recently indicated that the makeup of Perrigo's shareholder register is favourable for Mylan's takeover efforts. However, Mylan CEO Heather Bresch has said her company has other options if it does not succeed in purchasing Perrigo. Mylan also previously chided Perrigo for making misleading statements about its proposal, saying the comments may have violated Irish Takeover panel rules.

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