Teva Pharmaceutical Industries Ltd Raised Stake In Mylan NV, Edges Toward Intended Ownership Target

Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) has raised its stake in Mylan NV (NASDAQ:MYL) to almost 2.2%, as per a regulatory filing. The move is increasingly being seen as an acquisition tactic employed by Teva on its months-old target.

Teva extended a $40 billion unsolicited takeover offer to the generic drug-maker on April 21, only to be rejected blatantly on the grounds that the bid was undervalued and made no strategic, regulatory, or cultural sense. Despite constant reassurances on Teva’s part to convince Mylan of regulatory approvals, its management refuses to budge from its decision to remain a standalone entity.

At the same time, Mylan continues to up its own efforts to acquire non-prescription drug-maker Perrigo Company Plc, which has consequently rejected such attempts thrice.

Hoping that a Perrigo takeover will make the merged entity unaffordable enough to fend off Teva, Mylan’s management intends to conduct a shareholder vote in the third quarter of this year on a hostile attack on Perrigo. Sensing the danger, Teva has responded by taking its own takeover theatrics a step further. The company disclosed a 1.8% stake in Mylan last week, immediately sparking an objection from Mylan in the form of a letter addressed to Teva CEO Erez Vigodman.

Mylan branded Teva’s stock purchase in the company as a violation of US antitrust laws, which maintains that a stake above $76.3 million in a rival company cannot be bought without regulatory consent. Since Teva’s ownership in Mylan has far exceeded the limit, this may make the company liable to millions of dollars in fine for each day they buy Mylan shares in the market.

The law, however, is a little more relaxed in terms of foreign companies, as a 50% stake in rival firms is allowed. Mylan, which is incorporated in the Netherlands, maintains that though its principal executive offices are listed in the UK as per the US Securities and Exchange Commission, its principal offices are based in US for all purposes of the US Federal Trade Commission (FTC).

Meanwhile, FTC declined to comment on whether Teva is in fact liable to an investigation currently. In response to the letter, Teva did stop purchasing more Mylan shares from June 1 to June 3, but continued the same on June 4. As per the regulatory filing, Teva boasts 10.5 million Mylan shares as of June 4.

Reuters reported previously that Teva intends to raise its stake in Mylan up till at least 4.6% prior to Mylan’s shareholder meeting about the Perrigo deal. The 4.6% share will enable Teva to pull Mylan into Dutch courts and contest its management’s refusal of a merger. The company may also be able to challenge Mylan’s refusal to allow independent group the option to buy half of Mylan’s voting power in a move termed as stitching.

Furthermore, Teva hopes to buy enough shares in Mylan to vote against a Perrigo acquisition if need be. The move is also a convenient method for Teva to purchase Mylan shares for cheap prior to the possible acquisition – Mylan stock closed down 0.20% at $74.14 on Friday, considerably below Teva’s takeover bid of $82.

As highligted in Mylan’s letter to Teva, the world’s biggest generic drug-maker has not yet filed an official offer to acquire Mylan. It is expected to follow up on that only after it’s done buying the intended number of Mylan shares, as per Reuters.

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