The Mylan Perrigo deal hit another snag today (Friday) after Perrigo shareholders voted against Mylan's $26 billion offer.
Netherlands-based Mylan NV (Nasdaq: MYL) made a public offer for Dublin-based Perrigo Co. (Nasdaq: PRGO) in April and embarked on a hostile takeover when its bid was rejected.
The seven-month battle has become one of the most heated takeover battles in decades.
Mylan was offering $75 per share in cash, plus 2.3 Mylan shares to Perrigo shareholders. That was worth about $174.36 per Perrigo share.
"We have said all along that this offer from Mylan was a bad deal for our shareholders, as it significantly undervalued our durable business model and industry-leading future growth prospects," Perrigo said Friday.
Mylan said that about 40% of Perrigo's shares were tendered in the offer. The drug giant needed at least 50% to earn control of its smaller rival.
Mylan and Perrigo shares were both extremely volatile following the news of the Mylan Perrigo deal. And they were moving in opposite directions...
Mylan Perrigo Deal News Creates High Volatility
Despite winning the vote, Perrigo watched its stock fall nearly 10% intraday to $140.40. However, the Mylan stock price jumped 14% to $49.44 after the news.
The sharp drop in Perrigo's share price was "not a surprise," and the company moved to take advantage of the decline. Perrigo announced it will immediately begin a $2 billion share repurchase program. It plans to complete $500 million of the planned repurchase by the end of 2015.
Perrigo will also embark on a strategy to trim staff, divest units, and consider other possible mergers.
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The company said it continues to "look at transactions." Last month, Perrigo mulled buying Endo International. Perrigo ended talks when Endo asked for too much stock for its shareholders, representing a larger premium than what Perrigo was willing to offer. In July 2013, Perrigo bought Elan Corp. for $8.8 billion.
While Mylan "viewed Perrigo as a unique and exciting opportunity," the deal was not "required for the future success of our company."
Mylan reiterated that with favorable dynamics for its EpiPen Auto-Inject asset, along with promising future launches, the 2016 outlook for Mylan is very strong. Further out, Mylan expects the "foundational strength of our business will allow us to deliver on our target of at least $6.00 in adjusted diluted EPS in 2018."
Citigroup upgraded Mylan to "Buy" from Neutral" following the failed Perrigo takeover. Even with Friday's hefty gain, Mylan shares are still down 14% year to date.
Meanwhile, Perrigo remains a takeover candidate. Third-quarter earnings of $1.76 per share beat estimates by $0.02 and were up 26% year over year. Plus, its Ireland-based headquarters and low 12.5% corporate tax base (versus 35% in the United States) make it an attractive acquisition for a larger U.S.-based rival. Shares remain down 13.3% year to date.
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Related Articles:
- Bloomberg: Mylan's Hostile Bid for Perrigo Fails
- CNBC: Perrigo Shareholders Reject Mylan Takeover Bid
- The Wall Street Journal: Mylan Loses Hostile Bid for Perrigo