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Apr 24, 2015 5:03 PM

Mylan makes official bid for Perrigo in generic drug contest

The Associated Press

NEW YORK (AP) Generic drugmaker Mylan is making official its offer for over-the-counter medicines maker Perrigo as it remains at the center of a three-way battle: Mylan wants to buy Perrigo, while a larger rival wants to buy Mylan.

Perrigo has already rejected Mylan's offer and reiterated Friday it feels the bid, worth more than $30 billion, is too low. Israeli drugmaker Teva, meanwhile, said Friday it is committed to acquiring Mylan, which in turn has expressed skepticism about Teva's plan. Teva is offering $40.1 billion for Mylan.

Shares of Mylan have soared amid speculation about a possible sale to Teva. That includes a 3.2-percent gain on Friday.

By buying Perrigo, Mylan hopes to create a company with more than $15 billion in annual sales of generic drugs, over-the-counter medicines, nutritional products, infant formula and vitamins. It says the company would benefit as more medicines are switched from prescription-only to over-the-counter.

Teva, already the world's biggest generic drug company by revenue, wants to become even more dominant by buying Mylan and says the companies could save money by combining their manufacturing and research and development operations.

A combined Teva and Mylan would also have the leverage to try to raise prices on some generic drugs. The two companies have about $30 billion in combined annual sales, although regulators would likely require Teva to sell off some businesses before they allowed it to buy Mylan. Teva's offer requires Mylan to end its bid for Perrigo.

Teva's non-generic drugs include treatments for multiple sclerosis, Alzheimer's disease, cancer, and respiratory ailments. Mylan sells the EpiPen Auto Injector, an emergency treatment for allergic reactions.

If either deal goes through, it will be one of the largest entries in a cycle of increasing consolidation among generic drug companies. Both Mylan and Teva have expanded rapidly over the years, moving into new markets with deals. Perrigo, too, has boosted its revenue with big deals, and Mylan and Perrigo have each recently relocated to Europe from the U.S. in order to reduce their tax bills.

Mylan said last week that it doesn't believe the Teva deal offers a good fit and that regulators probably wouldn't approve it, but said it would review an offer from Teva.

Mylan shares have climbed 38 percent since rumors about a sale to Teva began swirling on March 10. Most of the gains came after Mylan disclose its offer for Perrigo.

Teva's bid for Mylan is worth $82 per share in cash and stock.

Mylan says Perrigo shareholders would get $60 in cash and 2.2 shares of Mylan stock for every Perrigo share they own. Based on Thursday's closing price, that combination would be worth $222.12 per share, valuing Perrigo at around $32.65 billion. However, Mylan says its offer is worth $205 per share, which values Perrigo at $30.14 billion. Perrigo says the offer is worth less than that because speculation about Teva's offer drove up the price of Mylan stock.

Mylan NV says it could achieve $800 million in pretax savings four years after completing an acquisition of Perrigo.

Shares of Perrigo Co. fell $8.74, or 4.3 percent, to $192.89 and Teva Pharmaceutical Industries Ltd.'s stock rose $1.16 to $64.41.

Perrigo says it has 147 million shares on the market including stock it issued in March as part of an acquisition.


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