However, Mylan says Perrigo’s stock, which stood at around $164 before Mylan’s approach, has been protected by its offer. Perrigo CEO Joseph Papa wrote to Mylan Chairman Robert Coury in response to his Tuesday letter, claiming that the company’s shareholders will not tender into Mylan’s “value-destructive” offer next week.
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Mylan announced that it wanted to buy the Dublin-based pharmaceutical firm in April but had its offer rebuffed.
All eyes are on Perrigo’s investors, who will have to decide whether to accept Mylan’s offer when the wannabe acquirer takes it to them next Monday.
“The $205-per-share value that Mylan initially proposed, and your current lower offer, are grossly inadequate”.
Mylan’s offer of $75 in cash and 2.3 of its shares for every Perrigo share equates to $185.52 per share based on the September 4 closing price, making for a transaction value of $27.1 billion, which is less than the $205 per share, or $32.7 billion value prior to the recent stock market decline. “This defies economic theory and practice, and is commonly viewed as such by leading analysts and commentators”, the letter read. We rejected your offers in April, long before any market sell-down.
Mr. Papa went as far as accusing Mylan of “destroying $14 billion of potential shareholder value” by a “preemptive dispatch of Teva’s 48% premium bid”.
In his letter, Coury said Mylan had experience with such scenarios, and still expected to realise at least $800 million in synergies. In our case, it’s negligible, if at all. It was a deal that saw him land a stake of 10% in the maker of over the counter drugs and brought Perrigo to the bourse in Tel Aviv, where it is amongst the most heavily traded.
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Assuming Perrigo’s profit growth rate of the past few years continues, Arkin estimates earnings per share of about $9.5 in 2017. “If we wait a few months, we would have the same price without all the hassle and risk involved in a Mylan deal”. Given it has been trading near 20 times its EPS forecast for a year ahead, Perrigo during early 2016 should be trading at around $190. It remains confident in Perrigo’s success without Mylan as well.
