Meitav DS Holdings Ltd. (TASE:MTDS) is the first financial institution holding shares in Perrigo Company (NYSE:PRGO; TASE:PRGO) to publicly declare its opposition to the offer to purchase that Mylan NV is expected to submit next week. Mylan is trying to take over Perrigo in a $27.1 billion deal, reflecting a 4% premium on the Perrigo share price.
"In our view as long-term holders of the Perrigo share, who have benefited from the return it created for investors over the years, giving up on such a company and a manager like Joseph Papa, who has generated amazing value for investors, would simply be a mistake," Meitav DS Israeli shares manager Moshe Rabinian told "Globes." According to figures from Stocker.co.il, Meitav DS owns 0.36% of Perrigo, which Rabinian says makes it one of the Meitav DS's major holdings in Israel.
According to Rabinian, the straw that broke the camel's back was Mylan's lowering the threshold from an 80% positive response to its offer to purchase for Perrigo to 50%, which will enable Mylan to gain control of Perrigo if 50-80% of the Perrigo shareholders accept the offer. "This is a significant point that shows that Mylan does not care about the good of the shareholder," Rabinian says. "We are liable to get a lose-lose situation here: an unmerged company, management that is unwilling to cooperate, and synergy that Mylan will be unable to take advantage of. This is an attempt by Mylan chairman Robert Coury and his management to do something by force. Mylan is making its gamble at our expense, and creating a moral hazard. There is no premium in the deal, and we see no reason to concede and create a kind of gamble."
"Globes": As a Perrigo shareholder, you are faced with a dilemma. If you don't accept the offer and Mylan takes control, it will delist Perrigo shares from trading, and you will be left with non-marketable shares.
Rabinian: "They have put us into a corner. Voting against our true wishes is unacceptable to us, and I hope that a majority of the shareholders think as we do, and the deal does not pass. This comes on top of other measures by Mylan showing defective corporate governance. In its dealings with Teva (which tried to take over Mylan, S.H.-V.) elements unacceptable in the business world could be sensed. Attacks and slander are not common practice. At Meitav DS, we believe in fair and transparent management, and Mylan has showed us that it is playing on a completely different field. Mylan says that it is concerned about all the stakeholders, such as the employees, for example, but except for taking care of Coury and his cronies, we have not seen this in practice - Mylan has already moved activity to India."
Rabinian notes that Meitav DS is taking into account the possibility that it is liable to lose if it does not accept the offer to purchase and Perrigo shares are delisted, saying, "There is a potential loss that I hope does not happen, but in any case, we will not lend a hand to such behavior. In the end, there is also value in educating the market about fair and proper conduct."
It could be that Perrigo's management should have agreed to discuss the deal with Mylan, and might have gotten a better price, instead of opposing negotiations.
"In contrast to Mylan's behavior with Teva, Papa did not take this approach. He merely argued that the price was not right, and at a different price, I assume he would have entered into negotiations for the benefit of the shareholders. I think that in this case, he acted correctly."
Rabinian finds it difficult to calculate whether the deal will pass, but says that the opinion that he is expressing represents a large proportion of the institutional market in Israel. "In my opinion, a large part of the market believes that the measure involves many negative points, and that Perrigo has been able to generate value over the years. As institutions, it is permissible, and even our duty, to take into account considerations that are not purely economic," he says, citing the fact that Perrigo has retained and developed its business in Israel.
Are you in touch with other institutions in this matter?
"We are not talking about it, but the spirit of these things is being transmitted like a scarlet thread. All in all, I hope that those who hold Perrigo shares continue giving credit to management, and are not seduced by underhanded opportunism and a short-term premium. We will not accept the offer, and hope that others in Israel and the US join us."
Published by Globes [online], Israel business news - www.globes-online.com - on September 10, 2015
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