|Mylan Executive Chairman Robert Coury|
On Monday, Mylan ($MYL) slapped Teva ($TEVA) with a laundry list of reasons it wasn't interested in a tie-up. The offer undervalued the company. Mylan didn't like the risks that came along with Teva's long-underperforming stock. Too much overlap between the businesses would only result in "short-term financial pop and longer-term value erosion."
But for Mylan, the problems with a get-together go beyond the business--and Chairman Robert Coury said as much before the Israeli drugmaker came forth with its $40 billion bid. Pairing the two companies would be "without sound logic or cultural fit," he said earlier this month.
It's the "cultural" part Coury tried to hammer home Monday, in a public letter to Teva chief Erez Vigodman. It's no secret that Teva has seen some tumult among its higher-ups--including the board disagreements that chased former CEO Jeremy Levin out the door in 2013. Then-Chairman Phillip Frost characterized their differences as "subtle," rather than a direct butting of heads over Levin's strategy, but others say the board interference was more extreme.
"Levin would have to go to Miami to kiss the ring each time he wanted a decision," an external consultant told the Financial Times last January. Ori Hershkovitz, a managing partner at Tel Aviv's Sphera Funds Management, not long after told Bloomberg that Teva's board was "like a nuthouse."
And Coury wants no part of that. The way he sees it, Teva's underperformance has more than a little to do with what he calls a "dysfunctional" culture. The generics giant's board "refuses to change, lacks adequate global pharmaceutical experience and consistently meddles in company operations," he wrote to Vigodman. And its string of CEOs since 2007--Shlomo Yanai, Levin and now Vigodman--has "left the company with a complete lack of long-term strategic focus."
Teva has, in fact, enacted boardroom changes since Levin's abrupt exit. First off, rumored meddler Frost is gone; after announcing last summer he'd be leaving his post, Yitzhak Peterburg--Teva's former VP of global branded products and one-time helmsman of Israel's leading healthcare provider--stepped into the role to start the year.
Teva also committed last year to downsizing the board from 15 to 12 directors in response to pressure from activist investor Benny Landa, and since then, it's added longtime Pfizer ($PFE) exec Jean-Michel Halfon and former Celgene ($CELG) skipper Sol Harer to up the pharma-experience factor.
But for now, that's not enough to convince Coury that Teva has truly transformed. Consider this: Teva went public with its Mylan bid without consulting its target first, a dealmaking no-no, Coury points out. Vigodman "had the opportunity to set the right tone, and show the world that there is a new Teva," he wrote to the company's chief. "Instead, you chose to approach Mylan in a way that demonstrates that the old Teva is very much still alive, which only continues to beg questions about Teva's credibility." -- Carly Helfand (email | Twitter)