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In a seething letter, Mylan’s executive chairman announced the unanimous rejection of a $40-billion unsolicited acquisition offer from Teva.
Mylan announced on April 27, 2015 that its Board of Directors unanimously rejected an unsolicited offer from Teva to acquire Mylan for $40 billion. The Board decided that the offer “grossly undervalues Mylan.”
The executive chairman of Mylan, Robert J. Coury, sent a letter to Teva’s president and CEO, Erez Vigodman, outlining the reasons to decline the offer. Coury begins the letter, which was released to the public, by stating that the offer should have been discussed privately prior to publically announcing an offer to acquire Mylan. Coury continues by citing ongoing problems within Teva’s infrastructure: “…I do hope you find a way to eventually change Teva's culture and establish credibility in your business dealings. However, we do not wish to make Teva's problems Mylan's problems, or to inflict them on Mylan's shareholders and other stakeholders. This potential combination is clearly in no one's best interest.”
Coury lists the four main reasons that the Mylan board reached its decision: valuation; currency of acquisition consideration, industrial logic, and cultural fit; regulatory risk; and other stakeholders. The valuation, as Coury explains, “can only be attributed to a lack of real commitment to pursuing this transaction.” Discussions could only have started if the offer was “significantly in excess of $100 per share,” rather than the $82 proposed in the unsolicited offer.
In terms of acquisition consideration, industrial logic, and cultural fit, Coury continues by explaining that for Mylan, partaking in a share exchange with Teva would be detrimental to Mylan as a whole. This type of transaction he writes, is of no interest to the Mylan board because it “requires Mylan shareholders to accept what we believe is low-quality and high-risk currency in the form of Teva shares in exchange for their higher-quality and lower-risk Mylan shares in a transaction that lacks sound industrial logic and is likely to be significantly value and growth destructive.” In addition to this, he adds that the geographical proximity of the two companies would add unneeded complexity to the business situation with no gains, and that Teva has significantly underperformed in the past three years, whereas Mylan has grown in revenue and shareholder return. The board also decided that in order to consider selling Mylan, the buyer would need to guarantee, without any exceptions, that the transaction would receive regulatory approval, as is explained in the letter to Vigodman. Finally, Coury writes that the board would never make a decision that it did not believe was in the best interest of its shareholders, and in this case, “Teva's expression of interest, which contemplates significant synergies without saying where they will come from and involves a potential acquirer that has been widely viewed as dysfunctional and poorly run and that has consistently flip-flopped on strategy, is not in the best interests of any of our stakeholders or of Mylan's mission.”