Leerink Sees Two Issues that Could Limit Mylan (MYL) Upside Amid Move to Acquire Perrigo (PRGO)

Leerink Partners affirms Mylan (NYSE: MYL) with an Outperform rating and $60 price target following an update to the company's Perrigo (NYSE: PRGO) takeover effort.

Analyst Jason Gerberry offered the following summary: With the backing of the majority of its shareholders, MYL announced this morning it will proceed with a formal offer for PRGO (MP) in the "coming weeks".

In spite of the positive vote, we still believe the barriers to consummation of the deal are high as PRGO has already rejected a $205/shr bid and based on the recent pull back in MYL's stock price, the last offer now implies a lower (~$195/shr) takeout price for PRGO. Assuming MYL wants to keep the pro forma <5 levered there is limited flexibility for MYL to raise the cash component of its offer. Absent significant appreciation in MYL shares in coming weeks, we believe it is unlikely that more than 50% of PRGO shareholders will tender their shares.

Two issues could limit upside to MYL shares in the near-term: (1) failure to acquire >80% of PRGO shares could lead to a lengthy (8-12 months) battle to replace PRGO's board and consolidate remaining PRGO shares; (2) with low visibility around MYL's forecasted $800m synergy target and likely dilutive nature of transaction, we believe there is risk of multiple compression if the deal gets done.

For an analyst ratings summary and ratings history on Mylan click here. For more ratings news on Mylan click here.

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