Since Mylan went public on Wednesday with a $205-per-share buyout offer for Ireland’s Perrigo, analysts have been weighing the pros and cons of a tie-up between the two generics makers. But there’s one thing at least a few of them agree on: The $29 billion bid has to be a response to other M&A action going on behind the scenes.
Here’s the timeline: Last Friday, Mylan ($MYL) put a poison pill plan into place, a measure that helps thwart hostile takeovers. Mylan sent a letter to Perrigo ($PRGO) this Monday, and it publicized its interest in the drugmaker two days later.
To Evercore ISI analyst Umer Raffat, the events suggest one conclusion. “[T]here was clearly a very real bid out there for Mylan,” Raffat wrote in a note to investors. And Bernstein’s Tim Anderson has a hunch who made it: Longtime rumor subject Teva ($TEVA).
“We expect Teva did make an overture to buy Mylan,” he wrote to clients Wednesday, noting that “we do not believe management is in principle hostile to the idea of being acquired.” Instead, it just wants a price Teva isn’t willing to pay right now, he figures–and he doesn’t see a hostile pursuit in the Israeli pharma’s future, either.
A transaction between the two top-tier generics players has long been buzzed about by industry watchers, with Teva currently on the M&A prowl and looking to return to its copycat roots. Some, though–such as BMO’s David Maris–have dismissed the possibility of a Teva-Mylan combo as “fluff,” pointing to tax and antitrust obstacles that make such a deal implausible.
Whether a Teva deal happens, the consensus on the buyside is that some sort of transaction involving Mylan will take place, Anderson noted–and Leerink Partners analyst Jason Gerberry sees a Perrigo buy as most likely. There’s a 70% chance Mylan ends up taking its bid for Perrigo into the $210 to $215 per share range to seal a deal, he estimates–a move he conservatively predicts will be 8% to 10% accretive in its first 5 years.