Can Perrigo Get More From Mylan?

Mylan just issued some 35 million new shares on the market when it sold about a third of the 110 million shares in the company still held by Abbott Laboratories (NYSE: ABT) following last year’s sale of $5.3 billion in Abbott’s offshore assets to Mylan. As part of the sale Mylan formed a new company in the Netherlands, in which Abbott retained a stake of about 21%. This was one of the last tax-avoidance deals done by a U.S. company.

For its part, Perrigo acquired Elan in 2013 in another deal the chief advantage of which was to avoid U.S. corporate income tax.

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The proposal offers a premium of 25% to Perrigo’s closing price last Friday. According to Mylan CEO Robert Coury’s letter to Perrigo’s CEO Joseph Papa:

In an environment where scale and reach are becoming increasingly important, the combination of our companies would result in an unmatched global platform, substantial revenue and operating synergies, and enhanced long-term growth potential, all of which would serve to create significant value for the combined company’s shareholders and other stakeholders. …

[E]ven with conservative assumptions for what we believe to be significant and meaningful synergies coming from both companies, our proposal provides Perrigo shareholders with an even greater equity value in the combined company than they currently have in Perrigo today.

Coury also offered Papa the position of co-chairman of Mylan’s board and said Mylan envisions “leveraging the best of our collective management and employee talent,” and it would like to see other Perrigo executives remain with the combined company. Coury would remain as CEO and executive chairman, and Mylan’s CEO and president would both retain the roles and titles.

Mylan is taking care of the top executives at Perrigo and, in return, probably expects their help in selling the deal to Perrigo shareholders. That will probably cost Mylan a few more dollars per share.

Mylan’s shares jumped more than 12% to a new 52-week high of $67.65 shortly after noon. The stock’s 52-week low is $44.74.

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