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11 October 2015 |
The shareholders of Mylan, a producer of generic pharmaceutical products, have approved a $35 billion unsolicited bid* for Perrigo, which will be taken straight to the shareholders of the Irish target company**. This comes after Mylan was met with strong opposition from the management of Perrigo after announcing its desire to acquire Perrigo in April 2015. This deal is intriguing because if it is completed, it will be the largest hostile takeover*** in the sector's history.
Peririgo's shareholders will be offered $75 in cash plus 2.3 Mylan ordinary shares for every Perrigo ordinary share. According to Mylan, this offer will be given directly to Perrigo shareholders on the 14th of September 2015. The board of Mylan has suggested that the transaction will produce a company with strong research and development capabilities, which would enable the combined company to expand its pipeline and continually drive growth. The transaction would also create a company with a strong financial profile with approximately $15.3 billion in sales, and significant free cash flows which would enable the company to reduce debt and boost reinvestment of profits into business activities.
It should be noted that there is are potential motivations behind this transaction that are not strictly related to synergies and profitability, but appear to also be tactical. Mylan itself had been the target of a $43 billion bid from Israeli competitor Teva earlier this year. This potential transaction was rejected, as the management of Mylan suggested that Teva was a poor cultural fit, and that the bid undervalued the company. However, it is suggested that Mylan is pursuing the acquisition of Perrigo in order to become a larger company, which in turn would make it more difficult to be acquired by competitors.
At the time of writing, it is yet to be decided whether Mylan's offer will be accepted. However, the proposed transaction is a reminder to be aware that there are many factors relevant to the motivations behind the initiation of a takeover. Although increasing profitability and market share will be at the core of most M&A transactions, it is important to note that these are not always the only aims of companies.
Goldman Sachs acted as Mylan's financial advisor. Cravath, Swaine & Moore LLP and NautaDutilh N.V. acted as legal advisors.
Morgan Stanley acted as Perrigo's financial advisor. Wachtell, Lipton, Rosen & Katz and A & L acted as Perrigo's legal advisers.
An offer that is made for a company that is not requested.
The company which another is attempting to acquire or merge with (in the above case, the target company is Perrigo).
An acquisition which is carried out against the wishes of the board of the target company.