Will Teva be the big winner from Mylan's Perrigo bid?


Citi: Mylan shareholders may have to choose between acquiring Perrigo and acquisition by Teva.

If you ask Citi Research analyst Liav Abraham who will profit the most from Mylan's bid to acquire Perrigo Company (NYSE:PRGO; TASE:PRGO), she will answer Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA).

It was reported last week that Mylan, one of the world's largest generic pharmaceutical companies, was planning to acquire Perrigo at a company value of almost $30 billion. Some market sources expect an acquisition bid for Mylan from Teva. Abraham believes that there is still a possibility that Teva will make such a bid, but she thinks it will pose a challenge to Teva.

"If Teva is interested in Mylan, a bid must come soon, but there are a number of challenging factors," she writes. "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."

According to Abraham, smaller acquisitions (in the original drug and generic fields) will enable Teva to expand its basket of products and diversify its risk. She believes that integration with Actavis's generic business is preferable for Teva to an acquisition of Mylan. "We don't think that Actavis's generic business constitutes a strategic asset for Actavis," she states, and adds that it is possible that the possibility that Mylan will be sold will tempt Actavis to sell its generic business.

She recommends "Buy" for the Teva share, with a $70 target price, in view of the recent rises that have pushed up the share within 5.5% of this price.

Published by Globes [online], Israel business news - www.globes-online.com - on April 12, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

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