Three weeks after beginning its purchase of Mylan N.V. (MYL) shares on the open market, Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) already holds almost 3.5% of its rival's shares. On Wednesday-Thursday last week, Teva bought 2.2 million Mylan shares for $165 million, bringing the value of its Mylan holdings to $1.26 billion.
Teva is seeking to acquire Mylan in a deal in excess of $40 billion, at $82 per Mylan share. The share purchases are being made at market prices, which are lower, although since Teva began accumulating shares, the Mylan share has risen 6%. While Teva paid $69-71 per share in late May, it paid around $74 last week.
Will Teva try to replace Mylan's board of directors?
Mylan is registered as a Dutch company, and under Dutch corporate law, a shareholder with a stake of more than 3% has the right to put proposals on the agenda at the company's shareholders meeting. Mylan is expected to conduct a shareholders meeting in a few weeks' time, when Mylan's acquisition of Perrigo Company (NYSE:PRGO; TASE:PRGO) for over $33 billion will be put to a vote.
As a shareholder, Teva can put its own proposal on the agenda, thereby appealing to the shareholders and bypassing the Mylan board of directors, which strongly opposes the Teva deal. Under certain conditions, as noted by Citi analyst Liav Avraham, Teva can, together with other shareholders, request a special shareholders meeting to raise a proposal to replace the Mylan board of directors. Teva's condition for acquiring Mylan is that Mylan not acquire Perrigo.
It is believed that Teva, under the management of CEO Erez Vigodman, will present an official offer to purchase for Mylan after the date for the shareholders meeting is set. At the end of last week, Citi said it believed that investors were underestimating the likelihood of the deal going through. According to Citi analyst Liav Abraham, the vote at the shareholders meeting is like a referendum in which Mylan's investors will decide which of the two deals is better. "In our opinion, from an economic standpoint, the Teva deal is clearly better," Abraham wrote.
In her opinion, there is no legal reason why the Teva deal should not be completed. She adds that if the Mylan shareholders vote in favor of the Perrigo deal, Teva will probably give up the idea of acquiring Mylan. Abraham also thinks that Mylan will again improve its offer for Perrigo ahead of the meeting. In her opinion, the likelihood of the Teva-Mylan deal being completed, assuming that the shareholders' meeting opposes the Mylan-Perrigo deal, is better than 50%.
Mylan has a poison pill mechanism under Dutch law. This is an agreement for an allocation to a foundation, which can in certain cases exercise its options for Mylan shares to an extent that has not been reported. Bloomberg reported that the foundation had hired Lazard as a financial advisor, an act likely to indicate progress towards putting the poison pill into action.
Published by Globes [online], Israel business news - www.globes-online.com - on June 14, 2015
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