More generic consolidation? Mylan goes after Perrigo
This article was originally published in Scrip
Further consolidation in the generics industry is likely now that Mylan has proposed a $29bn take out of Perrigo on 08 April. The larger generic drugmaker made its offer public, likely in hopes that investor pressure will push Perrigo into the union.
Mylan made an unsolicited public offer of $205 per share for its competitor; a combination that investors of both companies looked upon favorably. Mylan shares jumped 15% to linger near $69 apiece, while Perrigo shot up 30% to $211 per share before settling near $198, or plus 20%.
There has been plenty of consolidation in the generic world over the last five years as major players like Mylan, Teva and Actavis have gobbled up the competition.
The offer, which was made privately on 06 April, is a 25% premium to Perrigo's closing price of $163.73 on 02 April – the last trading day before the offer was made. The deal would be a mix of cash and stock.
"This proposal is the culmination of a number of prior discussions between Mylan and Perrigo about the compelling strategic and financial logic of this combination," said Mylan's Executive Chairman Robert J. Coury in a statement – indicating that Mylan and Perrigo were unable to come to terms on their own.
Mr Coury added in a letter to Perrigo's CEO Joseph Papa, "We have complementary operations across all of our businesses, both from a product and geographic perspective. In an environment where scale and reach are becoming increasingly important, the combination of our companies would result in an unmatched global platform, substantial revenue and operating synergies, and enhanced long-term growth potential, all of which would serve to create significant value for the combined company's shareholders and other stakeholders."
According to Mylan the tie-up would have plenty of upsides for both companies, including $15bn in pro forma sales, as well as a portfolio of generics, OTC, specialty brands and nutritionals across both developed and emerging markets.
Mylan's letter to Perrigo also stated other advantages:
- "Powerful commercial platform with strong reach across multiple channels, giving the combined company an increasingly important strategic advantage in light of the evolving distributor and payor dynamics across geographies;
- World-class operating platform, including an unrivaled combined manufacturing platform, renowned supply chain capabilities, vertical integration and global sourcing excellence with the cost advantages and flexibility to be a leading reliable source of high quality products around the world; and
- Strong R&D capabilities, including broad technological capabilities across prescription, OTC and nutritionals products, and expertise in complex, difficult-to-formulate products, which would continue to expand our pipeline and drive long-term growth."
Mr Coury also indicated that Perrigo's Papa would be made co-Chairman, while Mylan management including CEO Heather Bresch and President Rajiv Malik would remain in their positions. "Our Board also has great respect for your senior management team, and we envision the combined company leveraging the best of our collective management and employee talent. To that end, we are hopeful that, among others at Perrigo, Judy Brown and Todd Kingma would be willing to serve in important roles with the combined company," added Mr Coury.
Mylan has already done some diligence on the acquisition, but hopes to get a closer look at Perrigo's books.
Evercore ISI analyst Umer Raffat said in an 08 April note that other interested parties could be Actavis, Pfizer, Teva, Bayer and Novartis, amongst others. Mr Raffat also took an investor survey that showed that 60% of the 141 Mylan investors who answered would prefer the company merge with Teva, rather than acquire Perrigo.