Mylan offers to buy Perrigo for $28.9 billion

Mylan on Wednesday disclosed a proposal to acquire Perrigo for $205 per share in cash and stock, or a total of around $28.9 billion. The non-binding offer, which was submitted on April 6, represents a 25 percent premium to Perrigo's closing stock price on April 3. Shares in Perrigo surged as much as 31 percent on the news, above the proposed price, while those in Mylan rose up to 15.5 percent.

Robert J. Coury, Mylan's executive chairman, noted that the "proposal is the culmination of a number of prior discussions between Mylan and Perrigo about the compelling strategic and financial logic of this combination." The executive indicated that the offer "provides a very significant cash payment to Perrigo shareholders," although further details were not provided. Coury added that the deal "would result in meaningful immediate and long-term value creation," whilst delivering "value to shareholders and other stakeholders of both companies."

According to Mylan, the combination "would produce a company with critical mass in specialty brands, generics, over-the-counter and nutritional products." The drugmaker's combined sales in 2014 would have been around $15.3 billion. "This is the right time for our two companies to move forward together, and Mylan and our board are firmly committed to making this combination a reality," Coury commented.

As part of the proposal, Coury offered to name current Perrigo CEO Joseph Papa co-chairman of the combined drugmaker, while Mylan CEO Heather Bresch and president Rajiv Malik would maintain their current roles. Coury also proposed that other top Perrigo executives join the combined company.

However, Mylan cautioned that the proposal is not an announcement of a firm intention to make an offer under Irish takeover rules. The company added that there is no guarantee an offer will be made even in the due diligence pre-condition is satisfied or waived.

In response to the offer, Perrigo confirmed that it "received an unsolicited, indicative proposal from Mylan," adding that its board will meet to discuss the deal. The company added that "a further announcement will be made when appropriate."

Commenting on the news, Morningstar analyst Michael Waterhouse said "it has been thought for quite some time that Perrigo is a takeover target." Waterhouse remarked "what will be interesting to see is if we end up in a bidding war," suggesting Teva and Valeant Pharmaceuticals as potential rival bidders. Meanwhile, John Schroer, sector head of US health care at Allianz Global Investors, remarked "on the surface between the Mylan brand around the world, the greater scale and distribution strength that they have, I think there is a solid strategic benefit of folding in Perrigo and combining it with Mylan."

Mylan, which relocated its domicile to the Netherlands as part of its $5.3-billion acquisition of Abbott's developed markets branded generics business, was recently rumoured to have attracted takeover interest from Teva (for related analysis, see ViewPoints: Will an eagle-eyed Teva be back on the M&A trail soon?). In February, the drugmaker also agreed to purchase certain assets from Famy Care for $800 million.

Meanwhile, Perrigo transferred its domicile to Ireland in 2013 in conjunction with its $8.6-billion takeover of Elan. More recently, the company reached an agreement to purchase Omega Pharma for $4.5 billion.

For further analysis see ViewPoints: Mylan begins courting Perrigo – is offence its best defence against Teva?

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