Mylan snags Meda, advances its OTC ambitions, with $7.2B deal

Mylan Chairman Robert Coury

Mylan Chairman Robert Coury knows rejection but also the value of persistence. Four months after being spurned by Perrigo ($PRGO) shareholders, he has a $7.2 billion deal to buy Sweden's Meda, a company that two years ago rejected an earlier Mylan proposal.

The companies announced the cash-and-stock deal late Wednesday, the same day that Mylan ($MYL) reported earnings that fell short of analyst forecasts. They said Meda's board is recommending the deal to shareholders and that its two largest shareholders, holding a 30% stake, are on board with the idea, assuming certain conditions are met.

Mylan shareholders, however, seem less excited about the deal. Mylan shares were off nearly 17% in mid-morning trading Thursday.

The offer values Meda shares at SEK 165 per, which Bloomberg says is a 92% premium to Meda's close Wednesday. Mylan said it was a premium of about 12.9 times 2015 adjusted EBITDA. With debt, the buyout value reaches $9.9 billion.

Ticking off the benefits, Mylan said the deal can add $0.35 to $0.40 a share to its bottom line in 2017 with combined sales of $11.8 billion based on 2015 results. Mylan gets the beefed-up over-the-counter presence it has been seeking and a presence in a number of new emerging markets, including China, Southeast Asia, Russia, the Middle East and Mexico, which it said complement Mylan's work in India, Brazil and Africa.

Mylan expects to extract $350 million in annual savings, saying that might require some job cuts but cautioning that it was too early to say how that part will play out. It also said it is too early to say where the business will be located. Mylan has a Netherlands domicile but operates from Canonsburg, PA.

Much smaller than the roughly $26 billion Mylan offered OTC specialist Perrigo, Coury said the deal for Meda will not take it out of the hunt for other acquisitions.

"We structured this transaction in a way that optimizes our balance sheet and still leaves us ample financial flexibility to continue to complement our business with additional attractive opportunities," he said in a statement.

Mylan CEO Heather Bresch

Meda has been the target of any number of other buyers, including Mylan, which made a run at the company in 2014 but was reportedly turned down by the Swedish drugmaker. Mylan CEO Heather Bresch said today that the two companies have gotten comfortable with one another through their partnership in Europe with Mylan's EpiPen product.

Bresch also lauded the advantages of a combination: "We have been very clear about our commitment to enter the OTC space and continue our expansion in emerging markets and, with this transaction, we will have an approximately $1 billion OTC business."

Meda enhanced its own consumer health position in Europe last year when it spent $3.1 billion to buy family-owned Italian drugmaker Rottapharm.

The over-the-counter market was at the heart of Mylan's drawn-out attempt to buy Perrigo, but it just couldn't convince shareholders, or analysts, that the deal was in everyone's best interest. When the November deadline arrived, only about 40% of Perrigo's shareholders had signed on, far short of the 50% needed to move forward with the deal.

Mylan also released Q4 and full-year financials on Wednesday, reporting fourth-quarter earnings of $1.22 a share, compared with the $1.28 average of analysts' estimates, Bloomberg said. For the year, revenues were $9.45 billion, up 28% on a constant currency basis. It projects total revenues of $10.5 billion to $11.5 billion for 2016, with or without Meda.

- read the deal announcement
- here's Mylan's earnings release
- get more from Bloomberg

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