* Meda board says deal lacks support of biggest shareholder
* Meda shares drop 7.9 pct after rising 10 pct on Friday
* Approach comes against backdrop of healthcare M&A flurry
(Adds detail, background, shares, quotes)
By Sven Nordenstam
STOCKHOLM, April 28 Swedish drugmaker Meda
rejected an improved takeover offer from U.S.
generics firm Mylan which one person familiar with the
matter said valued Meda at around $9 billion including debt,
driving its shares sharply back down.
The new offer comes amid a flurry of deals in the industry
as it restructures in the face of health spending cuts and cheap
generic competition. U.S. firm Pfizer confirmed its
interest in Britain's AstraZeneca on Monday in what
would be one of the biggest pharma deals ever.
American drugmakers are also eyeing potential takeover
targets abroad as they look to relocate their headquarters to
other countries with lower tax rates.
Mylan's sweetened all-stock offer was worth 145 crowns per
share, a person familiar with the matter said - which would
represent a premium of about 50 percent over Meda's share price
before news of the U.S. firm's original approach emerged earlier
However the Meda board said the firm's biggest shareholder
did not back a deal. Its biggest investor by far is Stena Sessan
Rederi AB - controlled by the Olsson business family - which
owns a 22.7 stake and can block any takeover attempt.
The board also said it was confident in Meda's future as an
Meda, which makes speciality products, over-the-counter
drugs and branded generics, has long been viewed as a takeover
target in the sector. It has returned to growth due to new
allergy medicine Dymista and a strong contribution from emerging
markets where it has invested to drive sales in recent years.
Its sales grew by 4 percent last year on a like-for-like
basis and adjusted for currency swings, up from zero growth the
previous year. The company has forecast similar growth this year
with improved profit margins.
Meda shares were down 7.9 percent at 1324 GMT, giving up
most of the gains they made on Friday when they rose 10 percent
on news of the improved offer.
The new offer followed a rejection by Meda's board earlier
this month of a 130 crowns per share offer from Mylan, according
to the source familiar with the matter.
The latest approach would value Meda's outstanding shares at
$6.7 billion. The drugmaker also had net debt of $2.3 billion at
the end of last year.
This would mean a multiple of about 14 times analysts'
forecast for Meda's 2014 earnings before interest, tax,
depreciation and amortisation (EBITDA) on an enterprise value
basis. Mylan trades at about 10 times forecast earnings,
according to Thomson Reuters data.
The share price premium is also higher than the 30 percent
Pfizer said it had proposed for AstraZeneca in January, and
higher the roughly 25 percent premium generic drug maker Actavis
offered for Forest Labs in February.
"We believe Mylan may come back a third time," Pareto
Securities said in a research note, adding that a bid between
135 and 145 crowns would have implied "very decent pricing".
Pareto said the board's faith in Meda's growth prospects
meant a buyer may have to look at 2015 projections to buy the
firm now. "We believe this would imply a share price of SEK
160," Pareto said.
"We do also believe that the board has concluded that Mylan
is the distressed entity and not Meda, as Meda is a potential
target for many companies."
Meda reported sales of 13.1 billion crowns ($2.0 billion)
last year and EBITDA of 3.7 billion crowns. Analysts on average
expect earnings to grow by 10 percent in 2014, and by 14 percent
in 2015, according to Thomson Reuters data.
Apart from tax savings, Meda would boost Mylan's presence
outside the United States and give it access to Meda's
distribution channels in Europe and some emerging markets, where
Meda has grown quickly in recent years.
Rejecting Mylan's latest approach, the Meda board said in
its statement: "The board's decision is based on a strong belief
in the continued potential of Meda as a stand-alone company and
the assumption that a transaction cannot be completed as it
lacks sufficient support from Meda's largest shareholder."
Meda's chairman Bert-Ake Eriksson, who is also the chief
executive of Stena Sessan Rederi, declined to comment further as
the letter Meda's board had received from Mylan was
confidential. Mylan was not immediately available for comment.
The second and third-biggest shareholders in Meda are
Swedish pension funds groups Swedbank Robur and AMF Pension with
4.86 percent and 2.7 percent stakes respectively as of the end
of December, according to Thomson Reuters data.
Swedbank Robur did not immediately reply to a request for
comment, while AMF Pension declined to comment.
(Additional reporting by Helena Soderpalm; Editing by Mark
Potter and Pravin Char)