Generic drug-maker Mylan Inc's board has unanimously rejected the proposed $40 billion takeover bid by Israel-based Teva Pharmaceutical Industries Ltd, the world's largest generic drugmaker by sales, stating that Teva grossly undervalued Mylan and that proposed combination lacks industrial logic and carries significant antitrust risk.
While describing Teva's culture as ‘dysfunctional’, Mylan's executive chairman Robert Coury said in a 3,216-word critical letter that Teva's stock is a 'low-quality' and a 'high-risk' currency because it had underperformed its peers, including Mylan, consistently over the last three years.
“Teva has faced a constantly changing and flip-flopping strategy, rotating leadership, shareholder outrage and a flat to negative growth outlook,” he added.
Further, Coury wrote that any discussion of a sale would have to start at a price significantly in excess of $100 per share. Last week, Teva offered $82 per share, equally split between cash and Teva stock.
"The Mylan board has no interest in considering an expression of interest that... requires Mylan shareholders to accept what we believe is low-quality and high-risk currency in the form of Teva shares," it said. Also, it said that its partners and customers and partners did not support the possible combination.
However, in a response to Mylan's rejection, Teva stated that, “While we are disappointed that Mylan has formally rejected our proposal, Teva board and management team are fully committed to completing the combination of Teva and Mylan.
The combination of Teva with Mylan, which is currently ranked second in generic market with a market valuation of $33.3 billion, would create a generic behemoth with over $30 billion in revenue in 145 countries.
The deal is the biggest health-care deal proposed so far this year, and the second-largest healthcare transaction in the last 12 months, following generic drugmaker Actavis Plc's $66 billion purchase of Botox maker Allergan.
Globally, Teva has acquired several firms since 2005 and its last major generic purchase was of Ratiopharm GmbH in Germany for about $5 billion in 2010.
Mylan has been an aggressive player in India. It has acquired a string of firms in the country over the past decade starting with Matrix Labs. Two years ago, it sealed a deal to buy Agila Specialities from Strides Arcolab. Early this year, it announced a deal to buy a part of female health care businesses from Mumbai-based privately held firm Famy Care Ltd for up to $800 million (around Rs 4,950 crore).
This is the fourth-biggest in-bound M&A in the pharma sector ever in the country and came just over a year after Mylan executed an even larger deal to buy Agila from Strides Arcolab for $1.65 billion.
Recently, Mylan announced its plans to acquire Ireland-based Perrigo, which has also rejected the offer. Mylan said that it remains committed to its firm offer for Perrigo.
(Edited by Joby Puthuparampil Johnson)