"I'm a great believer in gut feeling. When your gut feeling leads to the right places eight to nine times out of ten, you can't worry about the one time you get it wrong, because you're human. It was important for me to come to Israel, to feel and understand people's mood, and I have a very good feeling," says Robert Coury, executive chairman of pharmaceuticals company Mylan N.V. (Nasdaq: MYL; TASE: MYL), which began to be traded on the Tel Aviv Stock Exchange last week. "I love the directness of the shareholder's we met with, that's my style," he adds, "As we expand globally, Israel is our natural next place. How could we not look at the opportunities there are here? I'm excited to continue learning about them, and this won't be my last visit."
Coury came to Israel at the head of a delegation of senior Mylan managers not only to celebrate the company's dual listing, but mainly to meet with institutions that hold shares in Perrigo Company (NYSE:PRGO; TASE:PRGO), and to try to persuade them to respond positively to Mylan's takeover bid. The previous week, the investors merited similar courtship from senior Perrigo managers, trying to persuade them of just the opposite.
Globes: Do you feel that you managed to convince the Israeli institutions?
"Absolutely. I and they have something in common: transparency. I love math because you can't beat it. One plus one is always two. When you separate it from the emotions and leave out the noise, at the end of the day, investors seek value creation. What I liked in the Israeli investors I met is the mentality of investing for the long term. That is also the reason that it was important for us to pledge that we didn’t come to list on the Tel Aviv Stock Exchange and if we didn't get Perrigo we'd leave. I plan to build relationships here and to be more prominent than was first thought of."
Mylan announced its intention of acquiring Perrigo six months ago. Two weeks later, Teva announced that it intended to buy Mylan. Coury was a vociferous opponent of the Teva deal despite the premium it offered Mylan shareholders, and in the end got his way when Teva abandoned the Mylan bid in favor of buying Allergan's generics division Actavis.
You conducted a tough campaign against Teva's takeover bid. Can you understand the perspective of Perrigo executives who are doing something similar against Mylan?
"I don't agree that I had a tough campaign versus Teva. My discussions with Teva were public and my views were transparent. Had Erez (Teva CEO Erez Vigodman) approached me privately, I would have given him all the information privately, but the moment it was public, I had no choice but to react in detail and in public.
"That's different from the situation with Perrigo. At the board level, you can't take an expression of interest and jump to the conclusion that it's a genuine proposal. It's not even close to our genuine, binding, and funded offer for Perrigo. I knew where I stood with Teva and could express it. I'm a little disappointed at Perrigo, because I thought that the minimum was to hold a dialogue, for the good of the shareholders. If you're chairman and CEO, that position brings with it responsibility. That's no different from what I had with Erez, and I would have continued the dialogue with him. Joe's (Perrigo CEO Joseph Papa) behavior is disappointing, and it's very disappointing from my point of view that the independent directors at Perrigo are not pushing him toward dialogue.
"Joe had six months to present a justifiable reason for this absence of dialogue: to give the shareholders an alternative deal, to add another "plus" to Perrigo's pluses strategy. It didn't happen. Instead, he reduced the earnings per share for 2016 in relation to the consensus, announced cost savings, the laying off of 800 employees, and a share buyback program. It's unbelievable. Everything he did actually helped us, because if the Mylan deal is so bad, and he said there was interest from other companies, how come there's no white knight? It seems he found that Mylan was paying such a high multiple that no-one else could come close."
A 50-80% response to the bid means that Perrigo becomes a Mylan subsidiary; over 80% will give Mylan full ownership of Perrigo; and below 50% will represent failure for the bid.
Suppose you reach more than 50%. After all the bad blood, will you manage to work in cooperation with Perrigo's management?
"There's no bad blood. And I don't call it a hostile takeover. Perhaps a 'stubborn takeover,' a new category. They chose to register as a company in Ireland, and according to Irish law the management and board can't prevent the shareholders from responding to a takeover bid. They didn't do a thing for the past six months, but they did do everything to prevent their shareholders from accepting the offer, and sued us everywhere in the world. They know the rules. Perhaps they're frustrated, but I'm not. The deal is excellent and speaks for itself."
Perrigo says: Why should we get involved with a company like Mylan, which has problematic corporate governance.
"Corporate governance according to Irish law is not to interfere in an offer to purchase to your shareholders. You can show your certificate with your score (Perrigo has a high corporate governance score, unlike Mylan, S H-V), but your conduct shows something different: they didn’t even meet with us in order to go to the shareholders with a full picture, and turned to legal proceedings against us. Should you rely on scores or actions?"
Another of Perrigo's claims is that it is worthy of a higher p/e ratio, on the basis of historical ratios, and because it is more exposed to consumer businesses.
"That reminds me of someone who says 'you should be more fond of me.' Management has to focus on growing profits, and not pay attention to 'how much they love me.' This is the biggest flaw in my opinion in Perrigo's independent strategy: it says to its shareholders, I'm doing my part, now you do your part and protect my high p/e ratio, continue to love me. That's ridiculous. A company has no control over that. That's not where management's focus should be.
"Now there has been a significant rebasing in the entire drugs sector. Even if Perrigo has a higher p/e ratio than the peer group, it certainly won't be at the level it was before. Perrigo's shareholders risk a significant fall in the stock, because our offer is keeping the share price high. For investment institutions, it will be hard to explain to those who placed their money with them if they choose not to respond to our offer, which gives them value in hand, in favor of something potential."
Published by Globes [online], Israel business news - www.globes-online.com - on November 9, 2015
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