Mylan NV (MYL): Is Now the Time to Strike?

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Mergers and acquisitions activity in the biotech and pharmaceutical space has been booming in recent years, as the big guys swallow up the smaller ones in hopes of enhancing their product pipelines. 2015 was a record year for the industry, at least in terms of M&A activity, and while 2016 has gotten off to a bit of a rougher start, we’re already starting to see new life here.

Mylan NV (MYL): Is Now the Time to Strike?But the reason I’m getting in touch today is actually about news that broke last November. Mylan NV (MYL) made headlines when it offered to buy out Perrigo Company plc Ordinary Shares (PRGO) for $29 billion in early 2015, but the offer was considered “hostile” and ultimately not accepted.

I was recently asked on Twitter whether I think we’ll see Mylan make another takeover attempt, and I wanted to hash out my thoughts here.

Mylan Is Primmed to Strike

Ultimately, I think we will see another bid, although maybe something a little less hostile. The offer was Mylan’s greatest attempt to join the consolidation movement in the industry, and while management says they’ve moved on to more promising opportunities, I’m not convinced.

Let’s start with why the deal was rejected in the first place. Mylan is one of the world’s leading generics and specialty pharmaceutical companies. Perrigo, on the other hand, is a top-five global over-the-counter consumer goods and pharmaceutical company.

The company had no plans to get bought out, and while Mylan was able to bypass PRGO’s CEO and board to make a direct offer to the shareholders, they simply weren’t having it.

The second issue was Mylan’s valuation. Earlier in 2015, Teva Pharmaceutical Industries Ltd (ADR) (TEVA) had attempted to take over MYL for $40 billion. In the end, TEVA decided to go another way and actually bought Allergan plc Ordinary Shares’ (AGN) generics business for $40.5 billion. As a result, Mylan’s stock price fell significantly, which also lowered the value of its buyout offer to Perrigo. At times, it was only a 3% premium.

Since the “hostile bid” was rejected in November, Mylan has moved on. According to CEO Heather Bresch, the company liked the prospects of acquiring Perrigo, “but we didn’t need to have them.” She said that Mylan is still interested in expanding its product pipeline into OTC medicine, but PRGO wasn’t the only way to get there.

So, here are my thoughts.

There’s no question that Mylan is still looking to make an acquisition. I’m a bit shocked that PRGO has gotten hammered so much in the last year, but with the stock currently down more than 50% from its all-time high above $200, now may be the time for MYL to pounce. I don’t know if they will or not, but it will be interesting to see.

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