September 10, 2015 / 12:57 PM / 3 years ago

Israeli Perrigo shareholder slams Mylan's $27 billion offer

TEL AVIV (Reuters) - One of Israel’s leading businessmen and a shareholder in Perrigo Pharmaceuticals (PRGO.N) will next week vote against a $27 billion offer for the company from generic drugmaker Mylan Inc (MYL.O), saying the price is too low.

Billionaire Mori Arkin’s ties to Perrigo go back a decade, when he sold his pharmaceutical firm Agis Industries to Perrigo for $850 million, a deal that landed him a 10 percent stake in the over-the-counter medicines maker and brought Perrigo (PRGO.TA) to Tel Aviv’s bourse, where it is among the most heavily traded stocks.

Arkin, former vice chairman of Perrigo and now a managing partner at Sphera Global Healthcare Fund, still retains just under 0.5 percent, or about $150 million worth.

Mylan said on Tuesday it would go directly to Perrigo investors on Sept. 14 with its offer of $75 in cash and 2.3 Mylan shares, or about $185 per share, after the board rebuffed Mylan’s approach in April.

“Usually, when a good company is acquired, it is for a significant premium. In our case, it’s negligible, if at all,” said Arkin.

Assuming Perrigo’s profit growth rate of the past few years continues, Arkin estimates earnings per share of about $9.5 in 2017. Given that it has been trading at 20 times EPS forecast for one year ahead, Perrigo in early 2016 should trade at $190.

“If we wait a few months, we would have the same price without all the hassle and risk involved in a Mylan deal,” Arkin told Reuters on Thursday.

However, Mylan says Perrigo’s stock, which stood at around $164 before Mylan’s approach, has been protected by its offer.

“Today, if you had been trading in line with the market and other health care stocks, Perrigo’s stock would be trading at around $150 per share,” Executive Chairman Robert Coury said in a letter to Perrigo on Tuesday.

Perrigo CEO Joseph Papa on Thursday wrote to Coury, again rejecting the deal and saying he was confident that shareholders would not accept the offer.

Perrigo closed at $177.07 on Wednesday, having peaked at $215.72 in April after the bid was announced.

This summer, Teva Pharmaceutical (TEVA.TA) sought to buy Mylan for more than $80 a share but was thwarted by Mylan’s board and a poison pill. Mylan now trades below $48.

Perrigo is domiciled in Ireland. Under Irish law, an owner needs 80 percent of votes to squeeze out minority investors. Mylan says it will run Perrigo as a separate entity if its offer receives more than 50 percent, but less than 80.

In his letter, Coury said Mylan had experience with such scenarios, and still expected to realize at least $800 million in synergies.

But Arkin said it would be a “nightmare” in which each board would pursue its own interest rather than a common goal.

Reporting by Tova Cohen; Editing by Kevin Liffey

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