Teva turns up the heat on Mylan, taking its stake past critical threshold

Teva ($TEVA) has upped its Mylan ($MYL) stake yet again--this time, passing a critical threshold that could help it pose a legal challenge to its generics rival.

The Israeli drugmaker has amassed a stake of 4.61%, earning it the right to initiate proceedings before the Dutch Enterprise Chamber, it said in a Friday statement. And if Mylan holds its meeting regarding its takeover try for Perrigo ($PRGO)--a deal that could thwart Teva's efforts--before September, Teva will limit its Mylan shareholding below 5%.

Now, Citigroup analysts Liav Abraham and Giovanni Urbanucci predict, a tender offer for Mylan is on the way--likely in the near future, they wrote in a note seen by Barron's.

"A formal tender offer by Teva is important ahead of a Mylan-Perrigo shareholder vote in order to provide a binding alternative to the Mylan-Perrigo offer, and in order to enable proxy firms to opine in favor of one transaction vs. the other, in our view," they wrote.

Mylan, for its part, has claimed that Teva's share-buying is illegal, pointing to U.S. antitrust laws. "We consider Teva's stakebuilding as a further indication of its intention to meddle with our business, strategy and mission while remaining unclear as to its actual intentions," Mylan Chairman Robert Coury wrote in a letter this month.

But as Teva contends, what U.S. laws say doesn't quite matter for a company that moved its domicile abroad when it completed a tax inversion.

"We note that you have been saying you are a Dutch company when you believe it helps you create unprecedented governance structures, a U.K. company when it helps you lower your U.S. taxes and a U.S. company when you believe it helps you prevent Teva from purchasing Mylan shares," CEO Erez Vigodman and Chairman Yitzhak Peterburg pointed out in their own note last week.

Meanwhile, Perrigo, too, seems less than thrilled about its prospects as deal bait. It's so far rejected Mylan multiple times, claiming the company's offers "substantially" undervalue its business.

- read Teva's release
- get more from Barron's

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