Perrigo's share price has shot up to a peak of $199, giving the pharmaceuticals company a market cap of some $28 billion. The rise in the rise in the share price followed Mylan's announcement of a $205 per share cash and shares bid for Perrigo, which values the company at almost $30 billion. The putative deal encouraged Mylan investors too, and its share price jumped 18% between Wednesday and Friday. Mylan's market cap on Nasdaq is now about $26.6 billion.
Perrigo is traded both in New York and Tel Aviv. It listed on the latter exchange a decade ago when it acquired Israeli pharmaceuticals company Agis for over $800 million in cash and shares, replacing Agis on the exchange, and enjoying the status of a Tel Aviv 25 stock ever since. Since becoming listed on the Tel Aviv Stock Exchange, supported by acquisitions that the company made, Perrigo has risen from a share price of under $18 to almost $200, a rise of over 1,000%, with the company's market cap going from under $2 billion to $28 billion.
There is no doubt therefore that an acquisition of Perrigo leading to its delisting from the Tel Aviv Stock Exchange will represent a painful blow to the local stock market, which has had to cope in recent years with declines in the number of stocks listed on it and in trading volumes. Perrigo represents 9.8% of the Tel Aviv 25 Index (second only to Teva), and has contributed substantially to the rise in the index in the past few years.
The rise in Perrigo's share price and the closing of the gap versus Mylan's bid indicate that the market believes that there is a high probability that Perrigo will indeed be sold, perhaps on the basis of the current bid, perhaps after an improved bid by Mylan later on, and perhaps to a third party who will make a competing bid for Perrigo before it's too late.
"Globes" revealed last summer that Perrigo had hired an investment bank to examine the possibility of a sale via a merger with a major pharmaceuticals company. At the time, Perrigo said that it would not respond to rumors. Although Mylan's bid was not the result of some active move by Perrigo, the fact that the company was open to offers presumably helped.
While Mylan's announcement of its bid was long and detailed, in the form of an open letter from its chairman Robert Coury to Perrigo chairman Joseph (Jo) Papa, Perrigo's public response was laconic, acknowledging the receipt of an unsolicited and indicative bid, and stating that the company's board of directors would discuss it and that there was no certainty that any bid would be accepted.
"Jo likely to just say no" is the headline of UBS's assessment of Mylan's bid. Analyst Marc Goodman believes that Perrigo Is not interested in a sale, certainly not against the background of its current share price, which has been depressed by quarterly volatility in the company's earnings, and that its management probably sees $225-250 per share as a more realistic price.
Mylan itself has been mentioned as a possible takeover target, with Teva being seen as a possible buyer, but acquiring Perrigo would make Mylan a more difficult quarry. "If Teva is interested in Mylan, a bid must come soon, but there are a number of challenging factors," writes Citi analyst Liav Abraham, "First of all, Teva will have to make a hostile takeover, because Mylan's management does not wish to sell the company. Secondly, there is uncertainty about Mylan's EpiPen drugs. Thirdly, Mylan added a poison pill last week. Fourthly, there is a risk in making a large and complex deal of this type. The last reason is that Mylan's shareholders will have to choose which deal to support: Mylan-Perrigo or Teva-Mylan."
UBS's Goodman also comments on the Teva angle, and says that Mylan's move for Perrigo may have been intended to protect it from a possible Teva bid. "Teva has no interest in bidding for Perrigo. However, with Mylan's bid effectively putting Perrigo into play, then we have to assume some large pharma and consumer companies may also take a look," Goodman writes.
Bank of Jerusalem Brokerage head of research Jonathan Kreizman raises the possibility of a "white knight" that will save Perrigo with a higher bid. "The chances of Perrigo significantly leveraging the bid depend on one or more players entering the race," Kreizman writes. He mentions Teva, Actavis and suchlike major pharmaceuticals companies that he estimates that Perrigo would prefer to Mylan.
Published by Globes [online], Israel business news - www.globes-online.com - on April 13, 2015
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