Can Mylan's poison pill thwart Teva takeover?

Shiri Habib-Valdhorn

Adv. Norman Menachem Feder: The poison pill is a temporary not a permanent obstacle.

Mylan's bid to acquire Perrigo Company (NYSE:PRGO; TASE:PRGO) is being perceived as a measure also designed to protect Mylan against a takeover by Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA). Beyond that, Mylan has another possible defense - a poison pill signed just a month ago - a mechanism designed to thwart the possibility of a hostile takeover.

Shortly after completing its acquisition of assets from Abbot Laboratories and becoming a Dutch company, Mylan took advantage of the possibility under Dutch law by taking on a poison pill in the form of an agreement to allocate an unreported number of call options to a foundation, which could exercise its options for Mylan shares in certain circumstances.

Will this poison pill prevent a Teva-Mylan deal? According to Adv. Norman Menachem Feder, a partner at the Caspi & Co. law firm and manager of its international division, "Dutch law is somewhat different from what is customary in the US, and also from most European countries, where there is usually no opportunity to introduce a poison pill, and the board of directors must remain passive in a takeover situation. In the Netherlands, options can be granted to a foundation, which must decide on its position. The foundation itself exercises the options if it decides that doing so is in the company's interest."

Feder believes that a poison pill like that of Mylan "can be a temporary obstacle, not a permanent one. It's not something that will definitely prevent a takeover." According to him, poison pills are usually used more to prevent takeover attempts than an actual takeover. "In many cases, large companies consider the possibility of taking over other companies, and when they see that there is a poison pill, they say, 'It's not worth the effort,' especially if they know that the poison pill is legally valid, and the Court will back the acquisition target."

Published by Globes [online], Israel business news - - on April 28, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

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