The generic drug-maker Teva Pharmaceutical Industries (TEVA, Financial) has created a stir in the market by making an unsolicited offer worth $40 billion to Mylan (MYL, Financial) which has continually been denying news of the anticipated merger. For the whole day, speculations were being made on the offer to be made by Teva and by day end; the news was finally out of the offer being made supposedly to overcome the generic competition Teva is facing with Copaxone drug.
Speculations going around
The world’s largest maker of generic drugs, Teva Pharmaceutical had been working with Barclays Plc. (BCS, Financial) and other banks as well for financial matters since quite long on the takeover of Mylan. Although Mylan was not interested in the deal and it even tried to acquire Perrigo Co. (PRGO, Financial) for $29 billion this month in an effort to become way stronger to be acquired by Teva. However, the deal didn’t take shape.
Mylan had also been giving statements in the media against the move by Teva. However, the latter was unmoved and was even faster in making the bid before Mylan becomes bigger by taking over Perrigo.
How the deal will help companies
Teva had planned the bid offer well and was able to shoot it within the expected timeframe. The offer made by Teva of $82 per share in cash and stock was above the trading price of Mylan although analysts still are of the view that Teva will need to soften a bit and raise it to $90 to $92 per share which is about 22 times Mylan’s expected earnings in 2015. Even the shareholders of Mylan might start favoring the bid if revised and will force the matter on the investors' table, too. To make things work, Teva might need to increase the cash component of the offer, currently standing at 50%. Mylan’s understanding of Teva’s intentions was quite clear which led it to offer a bid of $29 billion to Perrigo; however, it didn’t work out and might even be turned down by this week. Teva, on the other hand, is no more worried about the Perrigo takeover as its offer will sound more lucrative than a Perrigo takeover to the investors.
Teva has been looking to add new revenue sources as its multiple sclerosis drug Copaxone faces generic competition this year. Additionally, the purchase of Mylan will not only expand its harder-to-produce medical products, including soft gel caps, tropical and inhalant technologies and injectable, but also enhance its specialty pharmaceuticals portfolio. The acquisition will also make Teva a $30 billion annual revenues generating company and will aim to generate an annual savings of $2 billion. Teva is hopeful of closing this deal by the end of 2015 by selling assets or whatever iOS required getting through regulatory issues.
A general market scenario
The pharmaceuticals industry has been witnessing quite a few acquisitions and mergers in an attempt by the companies to become bigger and powerful as well as expand their reach to product lines with higher profit margins. Some of the traditional pharmaceuticals are also working on adding novel treatments for some of the rare diseases and cancer. Some of the recent deals have been Actavis Plc.’s (ACT, Financial) $66 billion purchase of Botox maker Allergen (AGN, Financial) and Abbvie Inc.’s (ABBV, Financial) proposed purchase of Pharmaceuticals and Valeant Pharmaceuticals (VRX, Financial) deal for Salix (SLXP, Financial).
Teva, too, is ready to discuss the issues that Mylan has and is looking forward to creating a stronger and much more meaningful organization. If successful, the acquisition of Mylan would be the second-largest healthcare transaction in the last 12 months. Teva is also working side by side on a public campaign to convince Mylan investors and shareholders on the advantages its offer will garner. Mylan, on the other hand, is expected to demand a higher price along with shared management and employee job protection as well.
