Teva shops for bigger Mylan stake in deal-forcing power play

Mylan Chairman Robert Coury

Teva ($TEVA) already has a 1.8% stake in deal target Mylan--a share that prompted Mylan ($MYL) Chairman Robert Coury to accuse it on Monday of breaching U.S. antitrust laws. But the Israeli drugmaker's response may be to pad that stake even further.

The company is seeking to buy more Mylan shares, weighing an increase to about 4.6%, sources told Reuters. That kind of stake would give Teva standing in Dutch court to potentially challenge its generics rival, which has so far steadfastly refused to come to the bargaining table.

All of this may happen before Mylan's record date--the deadline for investors to own shares if they want to vote on Mylan's tender offer for Perrigo ($PRGO), a potential tie-up it's touting as a superior option to a Teva transaction. A stake build-up would heighten the pressure on Mylan's execs ahead of the vote, and a tender offer for Mylan would likely follow.

Coury made Mylan's feelings on the subject quite clear in a Monday letter to Teva chief Erez Vigodman, pointing a finger at the Petah Tivka-based pharma for crossing the $76.3 million share threshold. As per U.S. antitrust law, companies must first nab regulatory approval before acquiring stakes of that size in their competitors, and Teva's far exceeds that limit, he said.

"We believe Teva's acquisition of Mylan shares violates the U.S. antitrust laws," he wrote. "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."

But as Reuters notes, whether Mylan's entitled to that antitrust protection comes down to where its "principal" offices are located. Mylan argues they're within the U.S., a fact that wouldn't have been disputed until it recently completed a tax inversion. Now, in SEC filings, it lists its principal executives' offices in Britain.

Meanwhile, Mylan isn't having the easiest time bagging its own pickup target, a move that could thwart Teva's takeover efforts. Perrigo has already rejected its suitor multiple times on the grounds that its bids "substantially undervalue" the company. And Tuesday, Perrigo hiked its own value further by buying a portfolio of OTC meds from GlaxoSmithKline ($GSK) and Novartis' ($NVS) consumer health joint venture.

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