Mylan foundation to block Israel's Teva hostile takeover bid

Dutch-based US pharmaceutical giant Mylan's independent foundation said Thursday it will exercise a call option allowing it buy shares to control half the company to fend off a multi-billion hostile takeover bid by Israeli rival Teva.

The foundation "formed its independent judgement that Mylan's best interests are at risk as a consequence of the uncertainty and threats associated by a possible takeover by Teva," the Mylan foundation said in a statement.

Mylan, a US-listed company that moved to the Netherlands a year ago for fiscal reasons, had dismissed Teva's $40.1 billion (36.4 billion euros) bid in April.

The foundation "has established that Mylan and Teva, although both large and successful players in the global market for generic products, have a highly dissimilar business approach, culture, financial model and related management compensation schemes," it said.

Also, Mylan focused on India, the United States and developing countries, while Teva focused mainly on Israel and Eastern Europe, the foundation added.

It said that Teva's projected $2 billion "of synergies" from the deal "will require major cuts not just in general and administrative expenses and sales, but also in research and development and manufacturing."

The foundation "believes it is a reasonable assumption that the necessary cuts will impact Mylan the most."

It added it was concerned that "taking out one of the top four players in the generics market will reduce competition and may have an adverse impact on the affordability of generic products."

The foundation believed "obtaining the required antitrust approvals without significant remedies are unlikely."

However the call option for shares was temporary and will remain in place no longer than necessary "to achieve the objectives in line with its purpose," it added.

- Call option 'unwarranted' -

Independent foundations are frequently formed in the Netherlands to block hostile takeover bids.

For instance an independent foundation linked to Dutch telecoms company KPN in 2013 successfully fended off a mega-takeover bid by America Movil of Mexico.

Teva, however, has amassed a 4.6 percent stake in Mylan which means it could challenge the defence in court under Dutch law, Bloomberg News reported.

Teva in a statement issued in Jerusalem said it "strongly disagreed with the (Mylan's) stated analysis".

The Israeli company said the foundation's decision to exercise a call option "is unwarranted, relies on false assumptions and risks depriving Mylan stockholders and other stockholders of the value inherent in a combination of Mylan and Teva."

"We are well advised on Dutch law including the ability of Mylan stockholders to challenge this action in court and are prepared to take the necessary actions at the appropriate time," Teva said.

Teva's bid to acquire Mylan comes as Mylan has launched an unsolicited takeover of its own for Perrigo, the maker of popular over-the-counter products such as Sudafed, Claritin and NyQuil. Perrigo rejected Mylan's initial offer and a second higher offer.

Generic drug companies are under pressure to do deals now because there are fewer big-money drugs shifting to generic status, compared with a few years ago, analysts have said.

The sector also viewed cost-cutting as a key tool for raising profits as the industry faces rising competition from suppliers in India, a trend which exerted downward pressure on drug prices.