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Mylan rejects Teva’s $40 bn offer as ‘gross undervaluation’

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Says, “bringing Teva’s ‘dysfunctional’ culture to the region (India) could disrupt the core of its business, result in the flight of key talent (in India and elsewhere), and meaningfully and adversely impact the results of the possible combination

Drug major Mylan has rejected a $40 billion unsolicited merger offer from Israel’s Teva Pharmaceutical Industries saying the bid “grossly undervalues” the company considering its best-in-class assets, including a strong foothold in India, according to a report in PTI.

Not only that such a merger proposal by Teva would “bring each other little in terms of new capabilities,” Mylan said “bringing Teva’s ‘dysfunctional’ culture to the region (India) could disrupt the core of its business, result in the flight of key talent (in India and elsewhere), and meaningfully and adversely impact the results of the possible combination.”

In a letter written to Teva President and Chief Executive Officer, Erez Vigodman, Mylan Executive Chairman Robert J Coury said the Mylan’s board “will certainly not consider engaging in discussions to sell the company unless the starting point of the discussions is significantly in excess of $100 per share.”

“This valuation is consistent with a best-in-class asset such as Mylan and with one that has a strong foothold in India, which provides a highly competitive cost structure and a strong backbone for growth,” Coury said in the letter.

Mylan said it operates a complex and substantial business in India where more than 1,20,006 employees work, 21 manufacturing facilities are located, and a major R&D hub for the company’s global business is positioned. Teva has a limited presence and experience in the country, and in fact has been ‘disparaging about India’s products and culture, Coury said.

“This challenged culture at Teva is, we believe, a direct result of a Board of Directors that refuses to change, lacks adequate global pharmaceutical experience and consistently meddles in company operations,” he added. The company also has serious concerns about Teva’s ability to integrate and efficiently run a combined company, and deliver meaningful shareholder value, he said, adding “there is simply no track record for investors to find.”

Mylan said that after a comprehensive review conducted in consultation with its financial and legal advisors, the board concluded the offer from Teva did not meet any of the key criteria that would cause the Mylan board to depart from its successful and longstanding standalone strategy.

“Our board has a very important fiduciary obligation to protect the best interests of the company’s shareholders and other stakeholders, and has always been open to considering all paths forward in that regard, and this situation is no different,” Coury said.

“However, that does not mean we will entertain offers that grossly undervalue the company, and leave our shareholders and other stakeholders exposed to serious risk,” he added.

Reacting to Mylan’s rejection, Teva President and Chief Executive Officer, Erez Vigodman expressed disappointment but said his company is committed to the cash-and-stock acquisition of Mylan for $82 per share.

“While we are disappointed that Mylan has formally rejected our proposal, the Teva Board and management team are fully committed to completing the combination of Teva and Mylan, and we stand ready to quickly complete a transaction that is compelling for both Teva and Mylan stockholders,” Vigodman said in a statement.

He further said, “We are eager to work with Mylan and its advisors to complete a transaction that will allow us to deliver the value inherent in the proposed combination to our respective stockholders, employees, patients, customers, communities and other stakeholders.”

Teva said it was is prepared “to devote all necessary resources to completing the proposed transaction. Teva stands ready and willing to meet with Mylan and its advisors immediately.”

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