MYL Mylan NV

By Liz Hoffman, Chelsey Dulaney and Vipal Monga 

Mylan NV lost its $26 billion hostile bid for Perrigo Co. after a seven-month pursuit, a rare outcome in what shaped up to be one of the most bitter takeover battles in decades.

Mylan said Friday that about 40% of Perrigo's shares were tendered in the offer. It needed at least 50% to take control of its smaller rival. The Wall Street Journal had reported Thursday night that Mylan was set to lose the bid.

The cash-and-stock offer expired 8 a.m. Friday, but most institutional investors had to tender by Thursday night to be counted by the national stock clearinghouse known as DTC, the Journal reported.

Shares of Mylan rose 8.8% to $47.01 a share in morning trading, while Perrigo shares fell 7.4% to $145 a share.

The sharp drop in Perrigo's share price was "not a surprise," said Judy Brown, Perrigo's chief financial officer. Ms. Brown said Friday that Perrigo would begin buying back its shares immediately to take advantage of the stock decline.

The company said it aims to buy back at least $500 million by the end of the year. Perrigo unveiled the buyback last month as it sought to satisfy its investors.

The company also will begin to execute a plan to cut staff, divest units and consider possible mergers, she said.

"We are continuing to look at transactions," Ms. Brown said.

Mylan Chief Executive Robert J. Coury said the company "viewed Perrigo as a unique and exciting opportunity, but not one that was required for the future success of our company."

Mylan has been trying since April to acquire Perrigo, a maker of store-brand versions of cold and allergy medicines. The fight--which briefly involved an unsolicited bid for Mylan by Teva Pharmaceutical Industries Ltd.--came during a year of fevered, at times contentious, deal-making between health-care companies.

There have been $532 billion of health-care takeovers announced in 2015, according to Dealogic, up more than 60% compared with the same period a year earlier.

Mylan's loss will hurt hedge funds that bought big blocks of Perrigo stock in recent months, hoping for a deal. Among the largest Perrigo holders are John Paulson's firm Paulson & Co., which had a roughly $500 million stake, as well as Elliott Management Corp. and Highfields Capital Management LP, which each had more than $300 million invested in the Ireland-based drug maker as of Wednesday, filings show.

Hedge funds with big pharmaceutical holdings have been battered recently, as scrutiny of drug pricing and a broader selloff in biotechnology stocks has made the sector one of the worst-performing of late.

Perrigo, meanwhile, joins a small club of companies that have successfully beaten back a tender offer on persuasion alone, without traditional corporate defenses. Irish takeover rules give boards of target companies few tools to shield themselves or find a "white knight" buyer, leaving Perrigo at the mercy of shareholders.

Perrigo last month unveiled cost cuts and a share buyback meant to satisfy investors. And the company briefly considered a large deal, including a takeover of Endo International PLC, The Wall Street Journal earlier reported. But as the bid entered its final weeks, Perrigo's board backed a stand-alone strategy that would put the company's fate in the hands of its investors--and in the ability of its chief executive, Joe Papa, to win them over.

Having done so, Perrigo must now confront its independent future. The company is still a target, owing in large part to its Irish domicile, which makes it an attractive tax base for a larger U.S. rival. And it must deliver on the cost cuts it promised investors last month.

Write to Liz Hoffman at liz.hoffman@wsj.com, Chelsey Dulaney at Chelsey.Dulaney@wsj.com and Vipal Monga at vipal.monga@wsj.com

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(END) Dow Jones Newswires

November 13, 2015 09:53 ET (14:53 GMT)

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