Israel's Teva drops bid for Mylan, buys Allergan for $40.5B

Mylan NV fought off a hostile takeover attempt with Israeli drugmaker Teva Pharmaceutical Industries Ltd. dropping its bid Monday and saying it instead would buy Allergan PLC's generics drug business.

The win was significant for Mylan in a period of mega-consolidations in the pharmaceutical industry in which some big names have lost their independence. The company, which moved its corporate address to the Netherlands this year, was able to use Dutch law to frustrate its unwanted suitor. But the success came at a price and could make the Cecil-based company's own hostile bid for generic drugmaker Perrigo Co. more difficult.

Mylan's $34 billion offer for the Irish company depended heavily on the value of its stock, which tumbled 15 percent with the deal from Teva off the table. Mylan shares accounted for about two-thirds of its cash-and-stock offer for Perrigo.

“Now that the value of the stock is much lower, let's see if Mylan comes back,” said Jeffrey Loo, analyst with S&P Capital IQ in New York. “They either need to give up a lot more stock or significantly increase the cash portion.”

Mylan spokeswoman Nina Devlin declined to comment.

Hostile takeover fights are not unusual. But the Mylan-Teva battle attracted extra attention because of the harsh words that executives of the two exchanged in publicly released missives. Mylan's disdain for Teva suggested it was not seeking to leverage a higher bid.

“In the past 18 months, we've seen a good number of hostile transactions,” Loo said. “CEOs believe there's more value in staying independent, as opposed to taking a premium today and selling out.”

The monthslong battle to resist Teva ended just days after an independent Dutch foundation acquired a majority stake in Mylan in a move designed to block a hostile takeover. The foundation gained power over a deal by diluting the voting rights of other Mylan shareholders. Mylan formed the foundation, known as a stichting, after moving its corporate address to the Netherlands to lower its tax rate.

With the distraction of Teva's offer out of the way, Mylan moved quickly to announce a date and location for its shareholder meeting on the Perrigo deal. The company said it would hold the meeting Aug. 28 in Amsterdam.

“We are very pleased to bring our highly strategic and compelling offer to acquire Perrigo to our shareholders for their support, and look forward to achieving this important next step in the process,” Mylan Executive Chairman Robert Coury said in a statement.

A run-up in stock prices is giving companies more buying power and emboldening them to make acquisitions — and spurn other offers. Increased merger activity is contributing to the appreciation of pharmaceutical stocks.

Mylan's stock enjoyed some of those gains. The stock hit a 52-week high of $76.68 in April after Teva made its offer. It has since fallen 26 percent. It closed down $9.57 to $56.37 Monday.

Perrigo repeatedly has turned down Mylan's acquisition bid, first made in early April. But Mylan plans to take a tender offer directly to Perrigo's shareholders.

“Combining Mylan and Perrigo will create a unique infrastructure that is able to maximize on evolving industry dynamics and capitalize on key trends,” Coury said.

Teva's $40.5 billion deal with Allergan, best known as the maker of Botox, is the latest in the wave of acquisitions hitting pharmaceuticals.

Teva, which built a 4.6 percent stake in Mylan to challenge the stichting in Dutch courts, said it would review its options for those shares.

The takeover defense used by Mylan was unusual because it relied on an arcane law written to protect Dutch companies from Germany during World War II.

There have been several examples in recent years of companies successfully resisting unwelcome takeovers.

Allergan this year combined with generic drugmaker Actavis in a $70 billion deal after shooting down advances by Valeant Pharmaceuticals International Inc.

In 2013, Perrigo bought Elan Corp. for $8.6 billion after that company's management resisted an offer from Royalty Pharma.

Ireland-based Horizon Pharma Plc last week raised an offer for the second time in two months to buy Depomed Inc. Horizon is pushing ahead with its hostile bid worth $1.97 billion, even though Depomed adopted a “poison pill” defense, a strategy to discourage a hostile takeover by making a deal more costly for the suitor.

Ravi Madhavan, a professor of business administration at the University of Pittsburgh's Katz Graduate School of Business, said many companies employ takeover defenses to slow interest from acquirers. Sometimes they work to block a deal, and other times, they result in higher offers.

“By and large, the purpose is to slow down the bid, not necessarily to thwart it,” Madhavan said.

“You buy yourself more time so that at the end of the day it could translate into a higher offer,” he said. “You're playing hard to get because you don't want to make it too easy for someone to come in.”

Alex Nixon is a staff writer for Trib Total Media. He can be reached at 412-320-7928 or anixon@tribweb.com. The Associated Press contributed to this report.