Billionaire hedge fund manager John Paulson, who became a household name during the Great Recession for a hugely successful short on subprime mortgages, increased his ownership of Mylan NV to 4.5% or 22 million shares. John Paulson bought the additional seven million shares of Mylan on April 30th. Paulson’s hedge fund, Paulson & Co., increases their stake during a time in which Mylan faces a possible merger with Perrigo Company or a takeover by Teva Pharmaceuticals. Paulson favors the $41 billion takeover offer from Teva, while management of Mylan is convinced that acquiring Perrigo is the proper route.
Debate over acquisition vs merger rages on between shareholders and management
Just weeks ago, Teva Pharmaceuticals offered to buy Mylan NV in a deal worth $41 billion or $82 a share. Shares of Mylan currently trade at $71.16, a 15% discount to the offer price. However, the board of Mylan quickly moved to reject the offer shortly after. The reasoning? Mylan was in talks to takeover its rival Perrigo Company, in a deal worth $29 billion. However, Perrigo’s board also rejected Mylan’s bid for the company, but talks are still on going. Now, as John Paulson makes Mylan his second largest holding worth $1.6 billion, the board and Paulson will continue to go head to head in an effort to take the Teva offer. Most major shareholders support the Teva takeover, which they see as a better deal than the Perrigo bid. Meanwhile, Perrigo’s CEO Heather Bresch says she believes shareholders will ultimately see the value and come around to management’s side. Right now, the situation continues to be debated and discussed, as it will likely be for some time.
Coho Capital 2Q20 Commentary: Podcasts, The New Talk Radio
Coho Capital commentary for the second quarter ended June 30, 2020. Q2 2020 hedge fund letters, conferences and more Dear Partners, Coho Capital returned 46.6% during the first half of the year compared to a loss of 3.1% in the S&P 500. Many of our holdings, such as Netflix, Amazon, and Spotify, were perceived beneficiaries Read More
Mylan misses first quarter earnings estimates
While Paulson and the shareholders duke it out with management over the Teva deal and the Perrigo deal, Mylan posted a first quarter net income of $0.70 earnings per share on revenue of $1.87 billion. While revenue saw growth of 9.1%, analysts were looking for earnings per share of $0.71 on revenue of $2.07 billion. Management said currency exchange rates took a $93 million bite out of earnings, however, reiterated full year 2015 forecast of $6 per share.
Overall, Mylan and Paulson need to come to a consensus as to what the company’s direction should be. Mylan says there are too many issues at Teva and it does want to inherit the Teva issues. Instead, they believe taking over Perrigo would be a better route to financial growth and shareholder value. Ultimately, being that there is wide support among largest shareholders, I think we could see a possible Teva takeover, unless the debate lingers on and Teva loses interest. For now, expect increasing shareholder pressure on management.