Hostile Takeover Bid to Create World’s Largest Generic Drug Manufacturer Gets Even More Heated

Let the mudslinging begin in Teva's takeover bid for rival Mylan.

Photograph by Shutterstock

Photograph by Shutterstock

Teva Pharmacuticals remains in hot pursuit of rival Mylan — and the takeover bid is turning ever more hostile.

After Mylan rejected Teva’s unsolicited $40 billion acquisition offer on Monday (calling Teva’s stock “low-quality”), Teva President and CEO Erez Vigodman sent a tersely worded letter to Mylan Executive Chairman Robert J. Coury.

In the letter, Vigodman said he’s disappointed that Coury’s response to Teva’s offer “adopted such a vastly divergent tone” and ignores Teva’s “rich heritage, unique culture, industry-leading achievements and contributions.”

I firmly believe that our respective stakeholders do not support, or benefit from, mudslinging, mischaracterization, rehashing of history or selective presentation of facts. Instead, I would prefer to return the dialogue to the significant value creation opportunity that a combination of Teva and Mylan represents to the stockholders and other stakeholders of both our companies. … I fully agree with you that it would have been preferable to have engaged in a private discussion to explore this transaction. However, you left us no choice but to make our proposal public after you publicly rejected a potential offer before it had even been made.

Teva is an Israeli company that employs 2,000 people at its U.S. headquarters in Montgomery County. It’s unclear how the possible merger would affect those workers — but it would create the world’s largest generic drug manufacturer.

Mylan has been attempting to use its acquisition bid for Perrigo to fend off Teva’s advances — and it’s turning into quite the financial love triangle. On Wednesday, Mylan increased its unsolicited offer for Perrigo to $35.6 billion, but it was quickly rejected.

But the Wall Street Journal says that Mylan would be wise to try Teva on for size considering that Mylan is “rated one notch above junk by Moody’s Investors Service” and that it “ended 2014 with $8.5 billion in gross debt and a diluted share count of 398 million.”

True, accepting Teva’s offer wouldn’t remove equity risk altogether for Mylan shareholders. About half of its $82-per-share offer is stock. But in that case, Mylan would be using its high-multiple shares to pick up cheaper ones. Teva trades at around 10 times forward Ebitda.

Not to mention that the Perrigo move could induce Teva to sweeten the pot. In that case, it would be better for Mylan to receive than give.

Will Mylan agree? We’ll have to wait and see.