Coverage: Perrigo to survive hostile takeover, maybe

UPDATE: As of 9:00 a.m. Friday morning, Mylan officially lost its attempt to takeover fellow drug maker Perrigo. The company was just short of the 50 percent of shares needed to succeed.

Generic drug maker Mylan is expected to lose its hostile takeover bid of its peer Perrigo, according to several outlets. The takeover bid has been in the making for some time, and is set to expire at 8 a.m. Friday.

Tom Murphy of The Associated Press explained Mylan’s hostile bid:

Mylan NV had chased Perrigo Co. Plc for months before taking its offer directly to shareholders in early September. The generic drugmaker wants to combine its business with Perrigo’s over-the-counter portfolio of vitamins, nutritional products and infant formula.

Mylan shareholders voted in favor of the acquisition last month, and European Union regulators have cleared it. Mylan also said recently that it had already received clearance from the U.S. Federal Trade Commission after agreeing to sell seven of its generic drugs.

Mylan this week warned shareholders of Perrigo that the company’s stock would suffer if the bid is rejected, saying it would drop its bid if it didn’t get enough votes Friday.

Shares of Perrigo Co. fell almost 11 percent before the opening bell. Mylan shares jumped 12 percent

Both companies have tied up with foreign companies in recent years to trim their tax bills and organize in Europe using a maneuver called an inversion. Mylan became part of a new company incorporated in the Netherlands but still runs its business out of its Canonsburg, Pennsylvania, near Pittsburgh. Allegan, Michigan-based Perrigo combined with Ireland’s Elan Corp. and now lists its headquarters as Dublin.

The stock of both companies had fallen more than 10 percent since Mylan bypassed Perrigo’s board and took its offer to shareholders.

Liz Hoffman of The Wall Street Journal cited sources saying the deal would not go through despite Mylan’s best efforts:

Mylan NV is poised to lose its hostile bid for Perrigo Co., people familiar with the matter said, a rare outcome in one of the bitterest takeover battles in decades.

A minority of Perrigo shareholders tendered their stock into Mylan’s $26 billion takeover proposal by late Thursday night, the people said. Mylan needs at least 50% to take control of its smaller rival, which it has pursued for the past seven months.

The cash-and-stock offer expires Friday morning at 8 a.m., and shares could continue to come in. But most institutional investors had to tender by Thursday night in order to be counted by the national stock clearinghouse known as DTC, some of the people said, meaning the biggest holders have already made up their minds.

Mylan has been trying since April to acquire Perrigo, a maker of store-brand versions of cold and allergy medicines. The fight—which briefly involved an unsolicited bid for Mylan by Teva Pharmaceutical Industries Ltd.—came during a year of fevered, at times contentious, deal-making between health-care companies. There have been $532 billion of health-care takeovers announced in 2015, according to Dealogic, up more than 60% compared with the same period a year earlier.

A loss for Mylan will hurt hedge funds that bought big blocks of Perrigo stock in recent months, hoping for a deal. Among the largest Perrigo holders are John Paulson’s firm Paulson & Co., which has a roughly $500 million stake, as well as Elliott Management Corp. and Highfields Capital Management LP, which each had more than $300 million invested in the Ireland-based drug maker as of Wednesday, filings show.

Greg Roumeliotis of Reuters explained how fighting off the takeover would be a major victory for Perrigo:

If confirmed, the outcome would represent a major victory for Perrigo’s defiant Chief Executive Joseph Papa, and a bitter blow to Mylan’s Executive Chairman Robert Coury, who snubbed an acquisition offer from Teva Pharmaceutical Industries Ltd to pursue Perrigo.

Around 40 percent of Perrigo’s ordinary shares had been tendered ten hours before the tender offer was due to expire on Friday, significantly short of Mylan’s acceptance threshold of more than 50 percent, the people said.

While more shares could still be tendered, many large institutional investors would have tendered their shares at this stage if they were going to accept the offer, the people added.

The sources declined to be identified because the tally is not yet official. Perrigo declined to comment, while representatives for Mylan did not immediately respond to requests for comment.

Mylan, which first made a bid for Perrigo in April, went hostile in September, offering $75 in cash and 2.3 of its shares for each Perrigo share.

The deal’s rejection will now focus investors’ attention on Perrigo’s standalone strategy. Papa has said he is open to dealmaking, and sources familiar with the matter said earlier on Thursday Perrigo had held merger talks with Endo International Plc earlier in the fall.