Teva Pharmaceutical Industries Ltd. made an unsolicited offer to buy Mylan NV for about $40.1 billion, in the drug industry’s largest takeover attempt this year.
Teva, the world’s biggest maker of generic medicines, offered $82 a share in cash and stock, according to a statement. That’s about 23 percent above Mylan’s closing price April 16, the day before Bloomberg News reported Teva was considering a bid. Mylan, which says it makes about one of every 11 drugs prescribed to Americans, has said it wants to stay independent and that a combination with Teva would face antitrust hurdles.
The deal would create a generics powerhouse with more than $27 billion in revenue and re-establish Teva as the unchallenged giant in the industry. The Israeli company has lost market share to Indian manufacturers such as Sun Pharmaceutical Industries Ltd. Teva Chief Executive Officer Erez Vigodman has pledged to look for deals as its best-selling product, a branded treatment for multiple sclerosis called Copaxone, faces potential competition from generics.
“The attraction for Teva is that this deal would immediately allow them to grow and reduce their exposure to the impending drop in Copaxone sales,” said Sam Fazeli, an analyst at Bloomberg Intelligence in London. “We still would have to consider the ramifications of antitrust regulation.”
A Teva purchase of Mylan would face obstacles. Mylan took the unusual step of publicly rebuking its rival in a statement April 17. Mylan made an unsolicited $28.9 billion bid this month for Perrigo Co., which many saw as a trigger for Teva to act before Mylan becomes too big a target.
“We firmly believe that a combination of Teva and Mylan is a much more attractive and value-creating alternative for Mylan and its stockholders than Mylan’s proposed acquisition of Perrigo,” Vigodman wrote in a letter to his counterpart at Mylan, Robert J. Coury. “The combination will better address the evolving needs of patients and healthcare systems around the world.”
A Mylan acquisition would be about four times bigger than any previous Teva purchase. The bid would add to a record period of consolidation in the pharmaceutical industry. For Teva -- which sells copies of branded drugs at a discount when their patents expire -- a deal would allow it to immediately boost its scale, and give it access to Mylan’s global low-cost facilities in countries such as India, Brazil, Hungary and Poland.
Mylan, which is run from Canonsburg, Pennsylvania, this year acquired non-U.S. operations of Abbott Laboratories for $5.3 billion and in the process moved its tax address to the Netherlands.Teva is unlikely to redomicile to the Netherlands given that it receives tax benefits and investment incentives in Israel.
Mylan jumped 10 percent to $75 in trading before U.S. exchanges opened. Teva’s American depositary receipts climbed 1.3 percent to $64.12 at 9:35 a.m. in New York. A purchase price of $82 a share values Mylan at about $40.1 billion based on 489.4 million shares outstanding.
Mylan is among the companies developing generic copies for Copaxone, which had $4.2 billion of sales last year. Novartis AG’s Sandoz unit and Momenta Pharmaceuticals Inc. last week won U.S. approval for the first copy of the treatment.
Generic-drug makers announced or completed more than $100 billion in deals last year, worth five times more than any year since at least 2005. Dealmaking was spurred by low interest rates and a drive by companies to relocate to more favorable tax domiciles. In last year’s largest deal, Actavis Plc in November agreed to buy Botox maker Allergan Inc. for about $65 billion.
A tie-up between Teva and Mylan “is without sound industrial logic or cultural fit,” Coury said in a statement on April 17. What’s more “there would be significant overlap in the companies’ businesses and we believe that it is unlikely that any such combination could obtain antitrust regulatory clearances.” Teva said on Tuesday it had studied the regulatory issues and was confident the deal can be consummated. The takeover offer, it said in the statement, is contingent on Mylan ending its pursuit of Perrigo.
Buying Mylan would restart Teva’s strategy of acquiring other generic-drug makers. The company had slowed its acquisitions in that area in recent years, favoring deals for branded-drug companies such as the $3.5 billion purchase, announced last month, of Auspex Pharmaceuticals Inc. That deal, the largest since Vigodman became CEO in February 2014, will give Teva medications that curb tics and other movement disorders.
The company’s last major generic purchase was of Ratiopharm GmbH in Germany, for about $5 billion in 2010.
Teva, founded in 1901, was established in Jerusalem to distribute imported medicine on camels and donkeys. The company’s growth was spurred by the Hatch-Waxman Act, a 1984 U.S. law to encourage the rapid development of generic drugs and thus reduce medicine prices.
It then used revenue from a branded drug, Copaxone, to fund its acquisitive streak. Copaxone, discovered in the 1990s in research out of Israel’s Weizmann Institute of Science, is still the best-selling multiple sclerosis treatment.
Barclays Plc and Greenhill & Co. are advising Teva on the offer. Kirkland & Ellis LLP provided legal advice to Teva on the deal.
--With assistance from Ed Hammond in New York.