News Feature | April 9, 2014

Meda Turns Down Merger Offer From Mylan

By Marcus Johnson

Meda has announced that it has rejected a merger offer from generic pharmaceutical company Mylan. Meda acknowledged that talks took place, but ultimately the Swedish drug maker's board declined the deal for unknown reasons In a statement, Meda said, “All continued discussions between Meda and Mylan have been terminated without further actions.  The merger would have given Mylan operational control over Meda.

According to Bloomberg, Mylan has been looking to become a bigger player in the consolidating generics industry. The company's competitors — drug producers such as Teva and Actavis — have increased their generics growth by acquiring other firms and bybranching out into specialty and branded drugs. Thomas Maul, an analyst from DZ Bank AG in Frankfurt, says that a merger with Meda would have boosted Mylan’s respiratory and branded generics, as well as strengthened Mylan’s position in Europe and emerging markets.

However, there were also potential financial benefits to this arrangement as well;  people familiar with the deal says also say that Mylan was interested in Meda because of the potential tax benefits that the company could offer. If Meda had agreed to the merger, Mylan would have been able to begin the process of inversion, which would allow the U.S. based company to reincorporate in Sweden, Meda's home country. Pharmaceutical companies are increasingly using acquisitions as a way to reincorporate outside of the US and escape the high U.S. corporate tax burden. For example, Michigan based Perrigo acquired Elan for $6.7 billion and reincorporated in Ireland —  a move which is believed to have saved the company $150 million in taxes each year.

This trend towards inversions however, has been facing some pushback from Congress in recent months. President Obama’s recent budget, along with several new provisions in Senator Max Baucus’ corporate tax reform last year, both include language that would effectively ban inversions. While the ban has not happened yet, the race is on for companies, such as Mylan, to find suitable overseas candidates.

Talks of a merger have helped Meda's stock. Stockholm suspended trades for the company this past Friday when news of the potential merger broke. But when trading resumed this week, Meda shares were up 14 percent. The jump represented the largest one day gain since October of 2008. It has long been speculated that Meda would be acquired by another pharmaceutical company, with rumors of Sun Pharmaceuticals and Valeant Pharmaceuticals being interested in recent years.

 

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