Four days before the end of the period of Mylan N.V.'s (Nasdaq: MYL; TASE: MYL), offer to Perrigo Company (NYSE:PRGO; TASE:PRGO) shareholders, both sides are trying to exude confidence in the expected result, perhaps as part of the psychological warfare in the control battle. While Mylan is sure that it will obtain at least a 50% response, which will enable it to control Perrigo, Perrigo believes that Mylan's bid will fail.
Mylan is trying to take over Perrigo in a $26.2 billion deal, which gives a current premium of 10% over Perrigo's share price, and Perrigo is forcefully opposing the bid. Shareholders can accept the offer until November 13.
Globes: Joseph Papa, Perrigo chairman and CEO, how do you feel as the deadline approaches?
"Very good. We're sure that the investors know that Perrigo is a company that does good business, and we will continue to do so. We have had opportunities to talk to our investors, who see and appreciate our annual growth rate and our value creation."
Perrigo points to data from a survey carried out by Evercore ISI at the end of October, showing that out of more than 50 long-term investors in Perrigo, only a few plan to respond to Mylan's offer. Among hedge funds (68 of which participated in the survey), which can be perceived as investors seeking short-term opportunities, the division is more balanced, but there too almost half the funds plan not to respond to the offer. "The investors understand that it's a bad deal," is how Papa interprets the survey results.
But what can you tell an investor who says "Mylan is offering a premium, I'm accepting the offer"?
Papa: "I think that such an investor should think about the situation they are putting themselves in for the long term. They are also getting Mylan shares (the deal is 2.3 Mylan shares and $75 for each Perrigo share, S H-V). The deal will dilute Mylan's profit for at least three years, perhaps even longer, particularly if Mylan does not achieve an 80% majority (enabling it to gain full ownership of Perrigo). That's a problem for a fairly long time, and so this is a bad deal for Perrigo shareholders.
"Besides that, Mylan has a problem with about one third of its revenue: the businesses bought from Abbott have posted a 9% annual fall in revenue, and sales of EpiPen will fall as soon as Teva obtains approval to sell a generic version. This is a significant problem for Mylan and the shareholders.
Perrigo CFO Judy Brown says, "Mylan says that the deal will be accretive for Perrigo shareholders, but itself reported that it will be dilutive for Mylan until the fourth year after it is completed. If a Perrigo shareholder responds to the offer, they will become a Myan shareholder, so from their point of view as well, the deal is dilutive of profits."
One of your arguments against the deal is Mylan's defective corporate governance. Coury said in this context that Perrigo may receive a higher score for corporate governance, but it is acting against Irish law, to which it is subject, and which forbids interference in an offer to purchase to shareholders.
Brown: "We talked about our plans for the future, about the balance sheet, about buying back shares. We continue to manage the business well, to grow, to launch new products. If that is called interfering with an offer to purchase, so be it. There's nothing here that can prevent shareholders from considering the offer."
Papa: "To hear that from him is almost laughable. We've done nothing to interfere with shareholders. Rather the opposite is true: we have given them all the information so that they will be able to decide. We think it's a bad deal. And this comes from someone who, when Teva made a bid for the company he heads, he invoked a poison pill mechanism."
You have mentioned interest on the part of other companies. How is it that no white knight has come along and offered to buy Perrigo
"It's true that there were some telephone calls at the start of the process, but only because Mylan had put a bad deal on the table. That doesn't mean that it's critical for us to sell the company. We're not rushing to sell, because it makes no sense, certainly given the volatile pharma market."
Published by Globes [online], Israel business news - www.globes-online.com - on November 9, 2015
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