My oh Mylan! $29bn Perrigo deal would create 'unrivalled' manufacturing network

08-Apr-2015 - Last updated on 09-Apr-2015 at 12:34 GMT

A $205 per share bid for Perrigo could see Mylan shilling out $29bn for Perrigo

Mylan has bid $29bn (€27bn) to buy Perrigo in what the firm says will create a company with “unrivalled” manufacturing and supply chain capabilities across OTCs, generics and APIs.

Mylan has signalled its intention to set the pharma megamerger wheels rolling with its Executive Chairman Robert Coury laying out his firm’s intentions to buy Perrigo Company in a cash-and-stock transaction worth $29bn in a letter delivered earlier this week.

“As you and I have discussed on a number of occasions over the past few years, a combination of Mylan and Perrigo offers clear and compelling strategic and financial benefits, has sound industrial logic, and would create a global leader with a unique and one-of-a-kind profile,” he penned to Perrigo CEO Joseph Papa.

Specifically, Coury said a combined entity would create a “world-class operating platform, including an unrivalled combined manufacturing platform, renowned supply chain capabilities, vertical integration and global sourcing excellence with the cost advantages and flexibility to be a leading reliable source of high quality products around the world.”

Last year, Mylan spent $5.3bn acquiring Abbott's generics business, and in 2013 the firm bought Agila - including nine manufacturing plants - for $1.6bn.

Manufacturing Assets

Mylan’s operating network comprises of 24 sites which manufacture oral solid doses, injectables and transdermal and respiratory systems, as well as nine active pharmaceutical ingredient (API) and intermediate plants located across India.

The proposed deal would add 23 Perrigo site worldwide, including a plant acquired from Vedants Drug & Fine Chemicals Private Limited in 2009 which began producing API last year and has been designated to manufacture future mid-to-high-volume products to support Perrigo’s portfolio.

According to its 2014 annual report, Perrigo had 10,220 employees worldwide at the end of June 2014 (6,500 in the US, 1,300 in Israel, 1,200 in Mexico, 800 in the UK, 420 ROW) which would push Mylan’s workforce to approximately 40,000 should a deal be inked.

Generics and OTCs

Mylan’s portfolio of approximately 1,400 generic drugs would be bolstered by a further 800 prescription products, but the deal would also launch Mylan into the consumer health segment.

Perrigo boasts of being the world’s largest store brand OTC pharmaceuticals manufacturer, with its global consumer health producing cough and cold remedies, analgesics, gastrointestinal products as well as smoking cessation drugs and animal health products.

In 2014, “Perrigo manufactured 47 billion oral solid doses and approximately 3 billion liquid/cream doses in more than 3,000 formulations,” the company claims.

Teva to play?

Coury told Pap: “Our proposal is the natural culmination of our prior discussions and reflects our shared vision for the industry. This is the right time for our two companies to move forward together, and Mylan and our Board are firmly committed to making this combination a reality.”

This view has been echoed by investors, with a poll taken by Evercore ISI analyst Umer Raffat finding around 60% of respondents either ‘like’ the concept of the merger or ‘love it.’ However, the survey found only 38% was in favour of a Mylan-Perrigo merger, with 62% favouring a Teva-Mylan merger instead.

Amongst the more printable comments, one investor said this was a “defensive move from Mylan,” while questions were asked whether Teva would enter the bidding process.

“On paper Teva/Perrigo seems interesting,” one said, while another suggested: “Teva could do many smaller deals, both generics and branded, [and get a] better outcome.”