The hostile takeover of Perrigo Co. by Mylan NV failed to go through on Friday as the two companies finally agreed to part ways in their negotiations after a nearly seven month long chase. Mylan had offered $75 in cash and 2.3 Mylan shares for each Perrigo share, an amount Perrigo shareholders felt was inadequate. Shareholders of Perrigo tendered only 40% of their shares to Mylan, falling short of the 50% needed to close the deal. Mylan is a generic drug producer headquartered in Dublin while Perrigo is another Irish based drug maker specializing in private label over-the-counter drugs.
The $26 billion deal would have been yet another deal in the quickly consolidating generic drug industry. Initially, Teva Pharmaceuticals had been bidding to takeover Mylan, but Mylan argued a buyout of Perrigo would be better for its own growth and fought off Teva. After failing to acquire Mylan, Teva, an Israeli based generic drug maker, quickly found another outlet and in July agreed to acquire Allergan Plc’s generic drug unit for $40 billion. Shares of Perrigo fell nearly 6% to $146.90 while Mylan shareholders cheered the decision as Mylan shares rose 14% to $49.38.
Perrigo gains most of its revenues from cough and cold remedies it produces and sells as store brands. Mylan had wanted to add these allergy medications to its lineup as its own allergy medication, EpiPen, can potentially face generic competition as early as next year.
Given investor sentiment surrounding the deal, it was clear the deal did not have a significant chance of being passed. Perrigo Chief Executive Officer, Joe Papa said in a statement after the announcement, “We’re delighted with the results. The support we’ve received has been outstanding.” Both companies also stated they will continue to look for opportunities for growth moving forward.
However, the failure of the deal could spell bad news for the mergers and acquisitions market that has reached new heights this year. Drug companies have been at the center of that boom as in many cases investors have cheered on the takeovers. Removing Mylan’s bid for Perrigo, there have still been approximately $250 billion in mergers of drug companies alone this year. Fending off a tender offer of this scale hasn’t been accomplished since the 1980s. Additionally, the industry has come under scrutiny for some if its practices, including its pricing strategies.
By Gerald Lizzo