By Jonathan D. Rockoff
Mylan NV said Wednesday it is interested in buying rival Perrigo
Co. PLC for $28.9 billion in a deal that would be the latest tie-up
among midsize drug companies, if the rivals can reach
agreement.
Mylan said it proposed a cash-and-stock deal for $205 a Perrigo
share, which represents more than a 25% premium to Perrigo's
closing stock price on Friday. Perrigo reacted coolly, saying its
board would meet to discuss the proposal and cautioning that "there
can be no certainty that any offer will be made."
The proposal appeared to come abruptly. Mylan said the companies
had held "many conversations over the years," but also said it sent
Monday a letter to Perrigo CEO and Chairman Joseph Papa proposing a
transaction. Mylan said it still needed to do due diligence and
expressed hope Perrigo's board would embrace the approach.
"We have great respect for Perrigo's board and management team
and what they have built," Mylan Executive Chairman Robert Coury
said. "We look forward, in the weeks ahead, to working with them to
capitalize on this tremendous opportunity and working together to
create a unique leader with a one-of-a-kind profile in our
industry."
In going public with its proposal, Mylan is betting it can
persuade Perrigo leadership and shareholders to go along with the
sizable premium it is offering. Yet the proposal could prompt
Perrigo to see if other companies would make a higher offer. Even
if Mylan prevails, a non-friendly approach could sour Perrigo
employees on a combined company.
Non-friendly deal approaches have had a poor track record in
health-care recently. Last year, Botox maker Allergan Inc. agreed
to be bought by Dublin-based Actavis PLC after Valeant
Pharmaceuticals International Inc. made a hostile offer, and
AstraZeneca PLC successfully resisted the approaches of Pfizer
Inc.
A combination of Mylan and Perrigo would create one of the
world's top sellers of low-price medicines with $15.3 billion in
yearly sales, and further the consolidation among midsize drug
firms as companies do deals to adapt to a changing health-care
marketplace and stay competitive with rivals.
Amid the frenzy, analysts have been speculating Mylan and
Perrigo could be either buyers or targets.
The companies generally compete in different segments of the
business. Mylan is best known for selling generic prescription
drugs, though its top-selling product is the EpiPen emergency
treatment for allergic reactions. Perrigo makes over-the-counter
cough-and-cold remedies and infant formula for chains such as
Wal-Mart Stores Inc. and Walgreens Boots Alliance Inc.'s Walgreens,
which sell the products under their own names.
Each of the businesses is under pressure. Mylan has been coping
with upstarts in India and other emerging markets which have been
undercutting prices on its products, as well as bigger competitors
such as Israel's Teva Pharmaceutical Industries Ltd. and Actavis,
whose revenues have benefited from the lower tax rates of their
home countries.
In response, Mylan just paid $5.3 billion for Abbott
Laboratories's non-U.S. generic drugs business and reorganized in
the Netherlands to lower its tax rate. Mylan reported $7.8 billion
in total revenue last year.
Perrigo, meanwhile, has been struggling to keep growing despite
the low margins on the private-label medicines it sells. The
company got a boost a few years ago, after Johnson & Johnson
recalled children's Tylenol and other popular over-the-counter
medicines because of manufacturing problems, but the recalled drugs
have been going back on sale.
Perrigo also embraced a tax-lowering inversion deal to help cope
with the pressures, buying Ireland-based Elan Corp. for $8.6
billion in 2013. And it has been doing other deals, such as the
just completed purchase of a Belgian over-the-counter drug company
called Omega Pharma NV, to pick up products with higher margins
than store brands.
Perrigo reported $4.1 billion in net sales for the fiscal year
ended June 28, 2014, while Omega notched about $1.6 billion in
annual sales.
Write to Jonathan D. Rockoff at Jonathan.Rockoff@wsj.com
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