In three weeks, the shareholders of Mylan N.V. (MYL) will meet to approve the acquisition of Perrigo Company (NYSE:PRGO; TASE:PRGO). Perrigo CEO Joseph Papa took the opportunity yesterday to remind them that even if the deal is approved, it is still not sure that it will go through, because it also depends on the consent of Perrigo's shareholders.
"I'm not predicting how Mylan's shareholders will vote on August 28, but I want to remind everyone, including Mylan's shareholders, that if Mylan submits an acquisition bid for Perrigo, it won't be as easy to complete as some have portrayed it," Papa said in a conference call following the publication of Perrigo's financial results. He added, "The required vote for a successful acquisition offer is very high 80% of all of Perrigo's shareholders (who must consent to the proposal, S.H.V). We're talking with our shareholders, and are satisfied at their confidence in company management and our strategy as an independent company."
Will Perrigo try to find other buyers? In his answer to this question, Papa said that if Mylan obtains the agreement of its shareholders meeting and begins the acquisition process, "We'll make strategic decisions at the board of directors concerning what is best for the company. Other companies have expressed interest, but at the moment, we're focusing on Perrigo as an independent company."
The Perrigo board of directors has already rejected three Mylan offers since April. The most recent rejected offer included 2.3 Mylan shares and $75 in cash for each Perrigo share. Since Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) abandoned its plan to take over Mylan (by acquiring Allergan's generic division), the Mylan share price has dropped 17% to $54.60. At Mylan's current share price, the offer for Perrigo reflects a price of just of $200 per Perrigo share, lower than the original offer of $205, which the Perrigo board of directors rejected, saying that Perrigo was worth more. The current value of the deal is $29.4 billion, compared with Perrigo's $27.7 billion market cap.
For its part, Mylan yesterday reported that it had obtained approval for a bank bridging loan to finance the deal. Papa also said yesterday that the bid "substantially undervalued" Perrigo. "Being integrated into Mylan will dilute the strength of our consumer business and jeopardize the value we're generating form our shareholders, and will shrink our profit multiple," Papa claimed.
Papa mentioned the Mylan's main original product, EpiPen, which is expected to encounter generic competition, saying that the acquisition would expose Perrigo to the risk of dependence on one main product. "We're confident that by implementing our business strategy, we'll be able to achieve much higher growth than that reflected by the Mylan offer, Papa said. Answering a question from an analyst about the differences between the two companies' organization culture, Papa commented, "There's no doubt that there are differences in management style," but preferred not to spell them out. Nevertheless, he made one remark that could be interpreted as criticism of Mylan's corporate governance - he mentioned that Perrigo had won a prize in this category.
The results reported by Perrigo yesterday outperformed the analysts' forecasts. Revenue totaled $1.5 billion in the second quarter, slightly above the analysts' forecasts and 33.9% more than in the corresponding quarter last year, primarily due to the contribution of the Omega acquisition, which was completed several months ago, and which made up for a 3.4% decrease in Perrigo's main activity of consumer health. Royalties from sales of the Tysabri drug for multiple sclerosis slid 2.7% to $83.6 million, and sales of prescription drugs jumped 9.8% to $278 million. Quarterly net profit was down 57.2% to $56.4 million, while non-GAAP net profit (excluding certain accounting expenses) soared 36.8% to $320 million. Non-GAAP profit per share was $2.18, beating the analysts' forecasts by $0.22.
Published by Globes [online], Israel business news - www.globes-online.com - on August 5, 2015
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