Mylan Snaps Up Swedish Drugmaker MEDA in $7.2 Billion Deal

Published: Feb 11, 2016

Mylan to Acquire Meda

HERTFORDSHIRE, England and PITTSBURGH, Feb. 10, 2016 /PRNewswire/ -- The Offer is not being made, and this press release may not be distributed, directly or indirectly, in or into, nor will any tender of shares be accepted from or on behalf of holders in, any jurisdiction in which the making of the Offer, the distribution of this press release or the acceptance of any tender of shares would contravene applicable laws or regulations or require further offer documents, filings or other measures in addition to those required under Swedish law, Dutch law and U.S. law.

Price of SEK 165 per Meda Share at Announcement Represents a Multiple of Approximately 12.9x 2015 Adjusted EBITDA and 8.9x 2015 Adjusted EBITDA with Synergies

Strengthens Mylan's Position as a Diversified Global Pharmaceutical Leader with an Expansive and Growing Portfolio of Specialty, Generic and OTC Products and a Strong, Complementary Therapeutic Presence

Combined Business Will Have Critical Mass across Commercial Channels in Europe, a Leading U.S. Specialty Business, and an Exciting Platform for Growth in Emerging Markets

Expected to Be Immediately Accretive to Mylan Earnings, with Accretion Increasing Significantly after First Full Year (2017) as Synergies Are Realized; Creates Opportunity to Achieve $0.35-$0.40 Accretion in 2017 and to Accelerate Achievement of Previously Stated $6.00 Adjusted Diluted EPS Target in 2017 Versus 2018

Anticipated Annual Operational Synergies of Approximately $350 million

Meda's Board of Directors Recommends that Meda Shareholders Accept Mylan's Public Cash-and-Stock Offer, as it Delivers Immediate and Significant Value to Meda Shareholders; Meda's Two Largest Shareholders, Representing Approximately 30 Percent of Meda's Outstanding Shares, Have Undertaken to Accept the Offer

Mylan N.V. (NASDAQ, TASE: MYL), a leading global pharmaceutical company ("Mylan"), today announced a recommended public offer to the shareholders of Meda Aktiebolag (publ.) ("Meda") to tender all their shares in Meda to Mylan (the "Offer"). The total Offer consideration consists of a combination of cash and Mylan ordinary shares ("Mylan Shares") with a value at announcement of SEK 165 per Meda share. The total value of the Offer for all Meda shares, including Meda net debt, is approximately SEK 83.6 billion or USD 9.9 billion, which represents a multiple of approximately 8.9x 2015 adjusted EBITDA with synergies.

The combination of Mylan and Meda will create a diversified global pharmaceutical leader with an expansive portfolio of branded and generic medicines and a strong and growing portfolio of over-the-counter (OTC) products. The combined company will have a balanced global footprint with significant scale in key geographic markets, particularly the U.S. and Europe. The acquisition of Meda also provides Mylan with entry into a number of new and attractive emerging markets, including China, Southeast Asia, Russia, the Middle East and Mexico, complemented by Mylan's presence in India, Brazil and Africa. Mylan and Meda have a highly complementary therapeutic presence, which will create a leading global player in respiratory / allergy, and achieve critical mass in dermatology and pain, offering greater opportunities for growth in these categories.

The Offer has been unanimously approved by Mylan's board of directors and unanimously recommended by Meda's board of directors. Meda's two largest shareholders, representing in the aggregate approximately 30 percent of Meda's outstanding shares, have undertaken to accept the Offer, subject to certain conditions. Meda's shares are listed on Nasdaq Stockholm, Large Cap. The Offer is subject to the satisfaction of a number of customary conditions, including clearance from relevant competition authorities, and is expected to be completed by the end of the third quarter of 2016. The Offer is not subject to approval by Mylan shareholders and is not subject to any financing conditions.

Comments from Mylan

Mylan Executive Chairman, Robert Coury, commented, "Our acquisition of Meda will allow us to accelerate and deliver on the clear and compelling vision and strategy we have continuously communicated to our shareholders, and once again deliver a transaction that will create significant value. We believe Mylan is uniquely positioned in the global pharmaceutical space today, with very strong fundamentals and a long and successful track record of executing on all previous acquisitions and organic opportunities. We structured this transaction in a way that optimizes our balance sheet and still leaves us ample financial flexibility to continue to complement our business with additional attractive opportunities.

"Meda is a unique and strategic asset, with a high quality workforce, which will add to our powerful, diversified and sustainable global platform and provide exciting new opportunities for Mylan, its shareholders and all of our other stakeholders. I look forward to welcoming Meda's talented workforce to Mylan upon closing, and also to welcoming our newest shareholders, including Stena and Fidim. On behalf of Mylan's entire board of directors, we look forward to them becoming long-term shareholders in the success of our combined company."

Mylan CEO, Heather Bresch, commented, "This transaction builds on everything we have put in place around the world, including our recent acquisition of the Abbott non-U.S. developed markets specialty and branded generics business. Meda brings us greater scale, breadth and diversity across products, geographies and sales channels, and together we will have an even stronger global commercial infrastructure. We have been very clear about our commitment to enter the OTC space and continue our expansion in emerging markets and, with this transaction, we will have an approximately $1 billion OTC business at close and gain entry into new growth markets such as China, Southeast Asia, Russia and the Middle East. Meda and Mylan also have an extremely complementary therapeutic presence and we see exciting opportunities across a number of strategically important categories, particularly allergy/respiratory, given the strength of our combined portfolio, the multitude of exciting launches we will have in the coming years, and the commercial strength of our combined business. Importantly, this transaction is extremely financially compelling, providing significant accretion to Mylan's earnings per share, the opportunity for substantial synergies and the further acceleration of our growth trajectory, with the transaction providing the opportunity to achieve $0.35-$0.40 accretion in 2017 and to accelerate achievement of our previously stated $6.00 adjusted diluted EPS target to 2017, versus 2018.[1]

"Given our long relationship and existing successful EpiPen partnership in Europe with Meda, we have come to know their business, people and culture extremely well, and we are confident that we will be able to quickly begin realizing the significant value we see from this combination and continue to enhance our leadership position in today's highly competitive and rapidly evolving industry."

Comments from Meda, Stena Sessan Rederi AB and Fidim S.r.l.

"On behalf of the Meda Board, I am pleased to announce that we recommend to our shareholders to accept Mylan's Offer. We believe that the Offer provides excellent value for Meda shareholders and we share a common vision with Mylan to create a leading pharma player. The transaction will provide critical mass across all commercial channels in Europe, create a leading U.S. specialty business and provide an exciting platform for growth in emerging markets," said Peter von Ehrenheim, member of the Board of Directors of Meda.

"Over the course of more than 10 years, I have been privileged to first be a part of, and more recently to lead, Meda. I believe that Meda is an exceptional organization that has continued to go from strength to strength and has a strong and well-defined growth profile going forward. The proposed transaction with Mylan is very compelling from a strategic standpoint and I believe Meda will be a strong partner for Mylan and will bring additional value to Mylan. The two businesses are highly complementary, and the combined business will benefit from strong therapeutic presence in respiratory/allergy, dermatology and pain and inflammation, as well as enhancing our mass in Europe and US presence," said Chief Executive Officer of Meda, Dr. Jörg-Thomas Dierks.

"Stena Sessan welcomes the Offer made by Mylan and believes the combined entity will benefit all shareholders, given the combined scale in an ever consolidating market. The combined entity will create a global leader which is a diversified player across specialty, generics and OTC with a strong growth profile. Stena looks forward to becoming a long-term shareholder of Mylan," said Martin Svalstedt, Chairman of Meda and CEO of Stena Sessan AB.

"Fidim S.r.l. is delighted to receive the Offer from Mylan. Having been the owner of Rottapharm and then the second largest shareholder in Meda, we see this as the next step in continuing the market consolidation to extract the best value for all Meda stakeholders and to create a global pharma player of which we have the intention to remain a long-term shareholder," said Luca Rovati from Fidim S.r.l.

The Offer in brief

At announcement, the Offer consideration values each Meda share at SEK 165 and the total equity value of the Offer for all Meda shares is approximately SEK 60.3 billion or USD 7.2 billion.[2]
The total Offer consideration consists of a combination of cash and Mylan Shares. Subject to the potential adjustment to the composition of the Offer consideration as described below, Mylan is offering each Meda shareholder:
- in respect of 80 percent of the number of Meda shares tendered by such shareholder, SEK 165 in cash per Meda share; and
- in respect of the remaining 20 percent of the number of Meda shares tendered by such shareholder:
  - (i) if the volume-weighted average sale price per Mylan Share on the NASDAQ Global Select Stock Market for the 20 consecutive trading days ending on and including the second trading day prior to the Offer being declared unconditional (the "Offeror Average Closing Price") is greater than USD 50.74, a number of Mylan Shares per Meda share equal to SEK 165 divided by the Offeror Average Closing Price as converted from USD to SEK at a SEK/USD exchange rate of 8.4158;
  - (ii) if the Offeror Average Closing Price is greater than USD 30.78 and less than or equal to USD 50.74, 0.386 Mylan Shares per Meda share; or
  - (iii) if the Offeror Average Closing Price is less than or equal to USD 30.78, a number of Mylan Shares per Meda share equal to SEK 100 divided by the Offeror Average Closing Price as converted from USD to SEK at a SEK/USD exchange rate of 8.4158.
Substantial pre-tax annual operational synergies of approximately $350 million are expected to be achieved by year four after consummation of the Offer.
The transaction is expected to be immediately accretive to Mylan earnings, with accretion increasing significantly after the first full year (2017) as synergies are realized. The transaction creates an opportunity to achieve $0.35 to $0.40 accretion in 2017 and to accelerate achievement of Mylan's previously stated $6.00 in adjusted diluted EPS target in 2017 versus 2018.[3]
The Board of Directors of Meda unanimously recommends that Meda shareholders accept the Offer.[4] The Meda Board of Directors has obtained a fairness opinion from SEB Corporate Finance, Skandinaviska Enskilda Banken AB ("SEB Corporate Finance") regarding the Offer stating that the Offer is fair from a financial point of view to the shareholders of Meda.
Stena Sessan Rederi AB ("Stena") and Fidim S.r.l. ("Fidim"), which own approximately 21 percent and 9 percent, respectively, of the outstanding shares and votes of Meda, have undertaken to accept the Offer, subject to certain conditions.
The Offer is not subject to any financing conditions. Mylan will finance the cash portion of the Offer consideration through a new bridge credit facility arranged by Deutsche Bank Securities Inc. and Goldman Sachs Bank USA.
Mylan intends to list the Mylan Shares to be issued in the Offer on the NASDAQ Global Select Market in the United States and the Tel Aviv Stock Exchange in Israel.
The Offer is subject to the satisfaction of a number of customary conditions, including clearance from relevant competition authorities. The Offer is not subject to approval by Mylan shareholders.
The Offer is expected to close by the end of the third quarter of 2016 (with the acceptance period of the Offer is expected to run from 20 May 2016 to 29 July 2016).

Background and reasons for the Offer

Mylan believes the transaction has a compelling strategic fit. In an environment where scale and reach are becoming increasingly important, a combination of Mylan and Meda will create a platform for sustainable, long-term growth:

The combined company will be a diversified global pharmaceutical leader, with a strong presence across geographies, therapeutic categories and channels, and with the breadth, scale and diversity to drive durable growth for the long term.
Following completion of the acquisition of Meda, Mylan will have an enhanced financial profile with approximately USD 11.8 billion in combined 2015 sales and combined 2015 adjusted EBITDA of approximately USD 3.8 billion.
The combined business will have a balanced portfolio of more than 2,000 products across the branded/specialty, generics and OTC segments, sold in more than 165 markets around the world.
The transaction will build on Mylan's recent acquisition of the Abbott non-U.S. developed markets specialty and branded generics business to create an unparalleled European platform for growth - one that is well-positioned to succeed in this dynamic and challenging region. The transaction also consolidates EpiPen® Auto-Injector in Europe, providing greater opportunities to build the brand in this region.
The transaction delivers on Mylan's long-stated commitment to develop a substantial presence in the OTC segment, by creating an approximately USD 1 billion global OTC business at close.
Mylan's and Meda's complementary therapeutic presence will create a scale player in respiratory / allergy, dermatology and pain products, providing greater opportunities for growth in these areas and maximizing the potential of future product launches.
By offering one of the industry's broadest portfolios of products across all customer channels (e.g., specialty, generics and OTC), the combined company will be well-positioned to deliver greater value to customers, which is increasingly important in light of the evolving payor and distributor environment. The combined portfolio will be supported by an expansive global commercial infrastructure, with sales representatives operating in 60 countries. The combined company will retain significant control over its supply chain, operating one of the industry's most extensive and highest-quality manufacturing and research and development platforms with approximately 60 facilities.
Substantial pre-tax annual operational synergies of approximately $350 million by year four after consummation of the Offer are expected to be realized as a result of savings associated with integration and optimization across cost components and functions, and through leveraging opportunities of the combined commercial platform. Components of these synergies include: (1) optimization of the combined commercial platform, (2) optimization of COGS through world-class supply chain, vertical integration and global sourcing excellence, (3) elimination of redundant general and administrative costs, including public company costs, and (4) cross-fertilization opportunities of the combined product portfolio.
The transaction is expected to be immediately accretive to Mylan earnings, with accretion increasing significantly after the first full year (2017) as synergies are realized. The transaction creates an opportunity to achieve $0.35 to $0.40 accretion in 2017 and to accelerate achievement of Mylan's previously stated $6.00 in adjusted diluted EPS target in 2017 versus 2018.[5]
Mylan's pro forma leverage at close is expected to be approximately 3.8x debt-to-adjusted EBITDA, and the significant free cash flows generated by the combined company will allow for rapid deleveraging. As a result, Mylan will retain ample financial flexibility to pursue additional external opportunities.

Mylan believes that the Offer is compelling given that:

the Offer consideration represents a meaningful premium for Meda shareholders;
at announcement, the total value of the Offer for all Meda shares, including Meda net debt, is approximately SEK 83.6 billion or USD 9.9 billion, which represents a multiple of approximately 8.9x 2015 adjusted EBITDA with synergies;[6]
if the Offer is completed, Meda shareholders will become shareholders of Mylan, which has a clear track record of creating shareholder value, with an annualized three year total shareholder return of approximately 20.7 percent;[7] and
the Offer is fully financed and not conditional on further due diligence.

In addition to the compelling value to shareholders, the acquisition of Meda by Mylan would offer substantial benefits to the other stakeholders of both companies. For example, the combination would provide a broader variety of opportunities to employees. The position of creditors, customers and suppliers would also be enhanced by the combined company's scale and significant cash flows, and patients would receive improved access to high-quality medicine through increased scale across geographies and robust capabilities to drive innovation.

Management and employees

Mylan recognizes the exceptional capabilities and skills of Meda's dedicated management and employees and looks forward to welcoming these individuals to Mylan. Further, Meda has infrastructure in a number of markets where Mylan currently has limited resources, including Sweden. To realize the synergies discussed above, the integration of Mylan and Meda will likely entail some changes to the organization, operations and employees of the combined group. In the period following the completion of the Offer and following careful review of the needs of the combined business, Mylan will determine the optimal structure of the combined company to continue to deliver success in the future. Before completion of the Offer it is too early to say which measures will be taken and the impact these would have. There are currently no decisions on any material changes to Mylan's or Meda's employees and management or to the existing organization and operations, including the terms of employment and locations of the business.

The Offer

At announcement, the Offer consideration values each Meda share at SEK 165 and the total equity value of the Offer for all Meda shares is approximately SEK 60.3 billion or USD 7.2 billion.[8]

The total Offer consideration consists of a combination of cash and Mylan Shares. Subject to the adjustment to the composition of the Offer consideration as described below, Mylan is offering each Meda shareholder:

in respect of 80 percent of the number of Meda shares tendered by such shareholder, SEK 165 in cash per Meda share; and
in respect of the remaining 20 percent of the number of Meda shares tendered by such shareholder:

If the aggregate number of Mylan Shares that otherwise would be required to be issued by Mylan as described above exceeds 28,214,081 Mylan Shares (the "Share Cap"),[9] then Mylan will have the option (in its sole discretion) to (a) issue Mylan Shares in connection with the Offer in excess of the Share Cap and thus pay the share portion of the Offer consideration as described above (i.e. the 20 percent set out above), (b) increase the cash portion of the Offer consideration (so that it becomes larger than the 80 percent set out above) and thus correspondingly decrease the share portion of the Offer consideration (so that it becomes smaller than the 20 percent set out above) such that the aggregate number of Mylan Shares issuable by Mylan in connection with the Offer would equal the Share Cap or (c) execute a combination of the foregoing. The potential adjustment to the composition of the Offer consideration, together with illustrative examples, will be described in further detail in the offer document to be prepared for the Offer.

In short, each Meda shareholder will receive between SEK 152 and SEK 165 per Meda share in a combination of cash and Mylan Shares.[10]

Only whole Mylan Shares will be delivered to Meda shareholders who accept the Offer. Treatment of fractional shares will be described in the offer document to be prepared for the Offer.

If Meda pays dividends or makes any other distributions to its shareholders with a record date occurring prior to the settlement of the Offer, or issues new shares (or takes any similar corporate action) resulting in a reduction of the value per share in Meda prior to the settlement of the Offer, the Offer consideration will be reduced accordingly. The reduction shall first be made against the cash portion of the Offer consideration. Mylan reserves the right to determine whether this price adjustment mechanism or condition (vii) to the completion of the Offer shall be invoked. Notwithstanding the foregoing in this paragraph, Meda will be permitted to pay in 2016 its regular annual cash dividend in respect of Meda shares not exceeding SEK 2.5 per Meda share, with declaration, record and payment dates consistent with past practice, and such regular annual cash dividend shall not reduce the Offer consideration.

No commission will be charged in respect of the settlement of the Meda shares tendered to Mylan in the Offer.

The Offer is not subject to any financing conditions. The cash portion of the Offer consideration will be financed by a new bridge credit facility arranged by Deutsche Bank Securities Inc. and Goldman Sachs Bank USA.

At the time of this announcement Mylan does not hold any Meda shares or any financial instruments that give financial exposure to Meda shares, nor has Mylan acquired or agreed to acquire any Meda shares or any financial instruments that give financial exposure to Meda shares during the six months preceding the announcement of the Offer. For further information about the undertakings by each of Stena and Fidim to accept the Offer, please see "Undertakings to accept the Offer and shareholder agreements" below.

Share-based awards granted by Meda to employees under Meda's incentive plans

The Offer does not include any share-based awards granted by Meda to its employees. Mylan intends to procure fair treatment in connection with the transaction for holders of such share-based awards.

Offer value and premium

At announcement, the total value of the Offer for all Meda shares, including Meda net debt, is approximately SEK 83.6 billion or USD 9.9 billion, which represents a multiple of approximately 8.9x 2015 adjusted EBITDA with synergies.[11]

The Offer represents a premium of:

approximately 9 percent compared to the 52-week intraday high of SEK 152.00 per Meda share on Nasdaq Stockholm on 13 April 2015 for the 52-week period up to and including 10 February 2016, the last trading day prior to the announcement of the Offer;
approximately 68 percent compared to the 90 calendar day volume-weighted average share price of SEK 98.50 per Meda share on Nasdaq Stockholm, up to and including 10 February 2016, the last trading day prior to the announcement of the Offer; and
approximately 92 percent compared to the closing share price of SEK 86.05 per Meda share on Nasdaq Stockholm on 10 February 2016, the last trading day prior to the announcement of the Offer.

Financing of the Offer

The aggregate cash consideration payable in the Offer for all Meda shares will be approximately SEK 48.2 billion (USD 5.7 billion).[12] The cash consideration will be financed by a new bridge credit facility arranged by Deutsche Bank Securities Inc. and Goldman Sachs Bank USA. The conditions to drawdown are usual and customary for a facility of this type.

Recommendation from the Board of Directors of Meda

The Board of Directors of Meda unanimously recommends that Meda shareholders accept the Offer.[13] The Meda Board of Directors has obtained a fairness opinion from SEB Corporate Finance regarding the Offer stating that the Offer is fair from a financial point of view to the shareholders of Meda.

Undertakings to accept the Offer and shareholder agreements

Undertakings to accept the Offer

Mylan has received irrevocable undertakings to accept the Offer from (1) Stena in respect of 75,652,948 Meda shares, representing approximately 21 percent of the outstanding shares and votes of Meda, and (2) Fidim in respect of 33,016,266 Meda shares, representing approximately 9 percent of the outstanding shares and votes of Meda. The irrevocable undertakings given by Stena and Fidim relate to their entire respective holdings of Meda shares. Each of Stena and Fidim has undertaken to accept the Offer no later than five business days prior to the expiry of the initial acceptance period of the Offer. The irrevocable undertakings given by Stena and Fidim shall be terminated if (i) a third party, prior to the Offer having been declared unconditional, makes a public offer to acquire all outstanding Meda shares at an offer value exceeding the value of the Offer by more than SEK 15 per share of Meda, (ii) the Offer is withdrawn, (iii) the Offer is not declared unconditional on or before

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Mylan Snaps Up Swedish Drugmaker MEDA in $7.2 Billion Deal

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