Mylan NV (MYL.O) rejected Teva Pharmaceutical Industries Ltd's (TEVA.TA) $40 billion takeover offer on Monday, saying in a scathing letter that it grossly undervalued the company and that Mylan has no interest in payment in what it termed "high-risk" Teva stock.
Teva, the world's biggest maker of generic drugs, quickly responded to Mylan's refusal with word that it was "fully committed" and would move forward with the $82 per share cash and stock offer.
Teva said it had begun the regulatory approval process and that it expects to complete a deal by the end of 2015. The company will meet with Mylan shareholders this week, according to sources familiar with the situation.
The Israeli company will need Mylan shareholders like Paulson & Co on its side if it wants to get past the poison pill defense, aimed at making a takeover prohibitively expensive, that Netherlands-based Mylan has put into place.
Mylan's rejection was widely expected and sets up a three-way battle as it pursues its own hostile takeover of over-the-counter drugmaker Perrigo Co Plc (PRGO.N).
Sanford Bernstein analyst Ronny Gal said Teva is not likely to walk away while its is meeting with Mylan investors to ask them to advocate the merits of a deal to the Mylan board.
"If they (Teva) feel the shareholders are willing sellers..., then they will probably push it," Gal said. "If they feel there is no interest among shareholders in doing the deal at a price it can afford, then they will probably walk away."
Mylan shares fell 5.7 percent to $71.71 on Nasdaq, and Teva fell 3.8 percent to $61.93 on the New York Stock Exchange.
'High-Risk Currency'
Mylan Executive Chairman Rob Coury said in a lengthy, critical letter to Teva released on Monday that Mylan's $82 per share offer was too low. Coury said the board of directors would not consider any discussions unless "the starting point" was "significantly in excess of $100 per share."
Wall Street analysts had said Mylan might be looking for $90 to $95 per share and an increased cash component.
Coury said in the letter, which described Teva's culture as "dysfunctional," that Teva's stock had underperformed its peers, including Mylan, over the last three years and was "unacceptable."
"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.
In addition, it said its customers and partners did not support the possible combination.
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