Teva pressures takeover target Mylan with 1.8% stake buy

The three-way takeover battle between Israeli generic drug maker Teva Pharmaceutical Industries Ltd, Mylan NV and Perrigo Co heated up after Teva last week disclosed that it had acquired a 1.8-per cent stake in takeover target Mylan, which had made a bid for Perrigo but been rebuffed.

Mylan, which has called a shareholders' meeting early next month to obtain approval for its proposed takeover of Dublin-based Perrigo Plc for $34.10 billion, said that Teva's purchase of Mylan shares from the market in excess of the $76.3-million threshold, violates the US antitrust laws. 

Teva is rumoured to have raised its stake in Mylan to around 4.6 per cent prior to the shareholders meet and will certainly vote against the Perrigo deal.

Mylan, which has already rejected Teva's unsolicited informal bid last month, said that ''We cannot allow our shareholders' interests to be hijacked and we need to safeguard Mylan, its business, strategy and mission, and its stakeholders against Teva's meddling in our affairs and  improperly influencing the vote of Mylan shareholders by holding out an expression of interest.''

''The conduct of Teva has caused significant unrest and uncertainty within these groups and the continuation of Mylan's longstanding strategy is threatened by Teva's seemingly deliberate and uncertain expression of interest -- which can be withdrawn by Teva at any moment -- coupled with Teva's pattern of saying different things to different people about what it might and might not do.''

Analysts say that Teva may make a sweetened formal bid after it has raised its stake in Mylan to the threshold level of 4.6 per cent, because once it tables a formal bid, it cannot buy Mylan shares from the market.

Currently it is buying Mylan's share at $73.32, below its informal offer price of $82 per share.

But Mylan would be more vulnerable to a hostile takeover from Teva if Perrigo continued to reject Mylan's sweetened $33 billion takeover offer.

Established in Jerusalem in 1901 by Chaim Salomon, Moshe Levin and Yitschak Elstein, Teva started out as a small wholesaler of imported drugs. The company has since come a long way to become the biggest corporation in Israel.

Since it is based in Israel, Teva stands to gain huge tax benefits if its proposed acquisition succeeds. The merger would save about $2 billion a year through a mix of cost cutting and tax savings.

The proposed merger would create a generic drug giant with annual revenues of about $27 billion and a market capitalisation of about $100 billion, which means that a combination of the two companies would draw intense scrutiny from anti-trust regulators from several countries.

Though a generic giant in the industry, Teva has recently lost market share to rivals like India's Sun Pharmaceutical Industries.

Teva CEO Erez Vigodman is keen for acquisitions as the company's best-selling branded drug to treat multiple sclerosis, Copaxone, which accounted for $3.1 billion or nearly 20 per cent of Teva's $15.1 billion in revenue last year, lost patent protection last month.

Last month the US Food and Drugs Administration approved the first generic version of Copaxone, which would wipe out a third of the drug's sales by 2018, although Teva has switched its patient onto a version with longer-lasting effects.

Mylan has a portfolio of more than 1,400 generic pharmaceuticals and several branded medications. It also offers a wide range of anti-retroviral therapies, and is one of the largest active pharmaceutical ingredient manufacturers.

Last year Mylan acquired Abbott Laboratories for $5.3 billion, a move that allowed it to move its corporate headquarters to the Netherlands, although it still runs the company from Canonsburg, Pennsylvania.

The New York Exchange-listed company has a market cap of around $33.5 billion and posted net profit of $929 million in 2014 on revenues of $7.6 billion.