Mylan (MYL), the generic pharmaceuticals company that is now the object of a hostile takeover bid from Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA), reported its senior executives' compensation at the end of last week. The report is interesting in the light of the exchange between the two companies over the takeover bid. Mylan chairman Robert Coury's rejection of Teva's bid cast aspersions on Teva's corporate culture. In his riposte, characterized by Oppenheimer analyst Akiva Felt as "classy", Teva CEO Erez Vigodman wrote, among other things, "We are an organization that is committed to cost control and restraint at all levels of our organization. This includes our approach to executive pay and perquisites, which favors restraint and a pay-for-performance philosophy, a reflection of our fidelity to the interests of all stakeholders, and not just a select few."
Mylan executives do indeed receive substantially higher compensation than their counterparts at Teva. CEO Heather Bresch's compensation cost in 2014 was $25.8 million, up from $9 million in 2013. Most of it ($19.2 million) was equity compensation. Coury's 2014 compensation cost was $22.5 million, up from $15.4 million in 2013. The equity compensation element was $14.8 million.
Should Coury leave Mylan as a result of a change of ownership, he will be entitled to a golden parachute worth $72.1 million, made up of $44.5 million benefits and compensation, and the rest in the form of the maturity of options. Bresch's golden parachute is worth $45.9 million. As Bloomberg reported last week, one of the targets for which Mylan executives will be due compensation will be if the company's share price reaches $73.33. Teva offered $82 per share for Mylan, while Coury in his letter declared that the Mylan board would not consider any offer below $100.
As far as Teva itself is concerned, some analysts have raised their price targets for its share following the good quarterly reports it released last week. Deutsche Bank has raised its price target by $3 to $73, 17.4% above the current market price, while Merrill Lynch's price target rises $2 to $70, 12.6% above market.
Merrill Lynch analyst Sumant S. Kulkarni says he continues to like Teva with or without the Mylan deal, thanks to operational improvements and changes in generics, as well as developments in the company's product offering. Citi analyst Liav Abraham estimates that a combination of Teva and Mylan would lead to 2% annual growth in the long term, which she says highlights the need for investments in growth-generating assets.
Published by Globes [online], Israel business news - www.globes-online.com - on May 4, 2015
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