Much to the chagrin of the global pharmaceutical trade, Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) made known its intent to acquire its rival, Mylan NV (NASDAQ:MYL) for $40 billion.
The deal comes on the back of weeks of speculation that Teva would offer a buyout for Mylan.
Touted to be the largest deal of the year in pharma industry, Teva is working with some major banks, including Barclays Bank on finalizing the bid. Following the news of merger, Mylan’s shares nosedived touching the offering price of $33.3, indicating investor skepticism.
Mylan’s present market cap is valued at $33.3 billion. The consolidation move has caught the frenzied global pharma sector for quite some time.
The proposed merger would catapult the annual revenue and earnings of two companies to $30 billion. Coupled with this, taxes, interest and pay backs would fetch additional $9 billion to the two companies.
Exuding confidence about the deal, Erez Vigodman, Teva’s Chief Executive said that if the deal comes through, then Teva would be in a position to extract annual savings of nearly $2 billion from the combined entity. Further, Teva would be able to maintain its dividend.
Surprisingly, Mylan is tightlipped on the news of the merger. In a related development, Perrigo, an Irish company turned down a $2.9 billion buyout offer made by in the same month.
Global credit rating agencies, Capital IQ and S & P predicted that the deal effectively meant that Teva’s portfolio in the market would receive a major boost. In addition, the acquisition plan will serve as an opportunity for the company to propel the growth of its medical products like injectable, soft-gel caps, as well as a range of specialty pharmaceuticals in the global drugs market. By all indications, the company will surge in its reputation of being an unrivalled leader in generics, opined the market analysts.
Elaborating the merger move, the market analysts said that the main motive of Teva is to expand into more markets across the globe and it would automatically result in bigger price for the company’s products.