Six months ago, two huge deals were on the agenda in the pharmaceutical market. Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) tried to engineer a hostile takeover of Mylan N.V. (Nasdaq: MYL; TASE: MYL), which itself tried the same thing with Perrigo Company (NYSE:PRGO; TASE:PRGO). Teva made its acquisition of Mylan conditional on the latter's not acquiring Perrigo, so it was clear that at least one of the two deals would not come off. In the end, neither one did.
Since Teva gave up the idea of buying Mylan, and acquired Allergan's generic division instead, the struggle between Mylan and Perrigo heated up. In the contest over the heart of the Perrigo shareholders, the style may have been different, but the harsh messages came from both directions.
Mylan chairman Robert Coury spoke directly and vigorously against Perrigo's future strategy, accused Perrigo CEO Joseph Papa of playing Russian roulette with his workers' lives, and asserted that Perrigo was violating the Irish law, to which it was subject. In a more correct and quieter fashion, Papa said that Mylan's corporate governance was faulty, and said that Coury's statements about past discussions between the two companies were extremely inaccurate.
The investors preferred Perrigo's view, and this vote of confidence enables it to continue operating as an independent company. In an environment of mergers and acquisitions in the pharmaceutical industry, Papa must prove to them that they made the right choice, and that, as Perrigo said during the process, it is worthy of its historic multiple, which is higher than that of Mylan and the rest of the industry.
In the first stage, Perrigo will make independent acquisitions of shares, and will likely continue to make small and medium-sized acquisitions, as it has done in recent years. It will also search for a buyer for its vitamins business, and lay off several hundred workers around the world. Will Perrigo be able to remain independent in another few years? That depends on its continued generation of value, and also on the state of the market.
Where Mylan is concerned, Coury is already talking about other acquisition opportunities that have been spotted. The financial and management resources that Mylan spent on the Perrigo deal - legal and accounting costs, flights to meetings with investors all over the world, including Israel - were all wasted. Nevertheless, Mylan will be able to pay for other acquisitions, perhaps by consent, instead of hostile takeovers.
One of the questions that arises now in the Israeli context is what will happen to Mylan's dual listing on the Tel Aviv Stock Exchange (TASE). Mylan was listed for trading after a legal battle, and promised to be listed here for at least a year. In his meeting in Israel, Coury expressed enthusiasm about investors and opportunities in Israel, but it remains to be seen whether this was only part of his pitch to the investors.
As of now, Mylan has no business in Israel. Actually, if it were being listed now for trading, it would not meet the conditions for being added to the indices (these conditions were changed last week), due to its lack of connection with Israel. Because it was listed before the change, it will be added to the Tel Aviv 25 Index at the next updating of the index, and will add to that index's strong bias towards pharmaceuticals (the index also includes Perrigo, Teva, and Opko Health Inc. (NYSE: OPK; TASE: OPK)). Perrigo is the winner in the recent turn of events, and the TASE also gained from the addition of Mylan.
To some degree, Teva also profits from the recent process. The surge in the Mylan share price since the failure of its takeover bid for Perrigo cut its loss on paper from its 4.6% holding in Mylan shares to $525 million, after the loss had exceeded $700 million.
Published by Globes [online], Israel business news - www.globes-online.com - on November 15, 2015
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