Compass Lexecon President Daniel R. Fischel Argued Synergies Claimed by Acquirer Were Overstated
In July 2015, Mylan N.V., a pharmaceutical firm based in the Netherlands, announced an unsolicited tender offer to acquire Perrigo Company plc, an Irish pharmaceutical firm. Mylan claimed in its offering materials that the acquisition of Perrigo would generate large operational synergies, and that these synergies would be equally realizable, regardless of whether the tender offer succeeded in providing Mylan with 100 percent of Perrigo’s shares, or whether Mylan only managed to become a majority shareholder.
Perrigo filed a motion in U.S. District Court rejecting Mylan’s unsupported claim that, whatever synergies might exist with a wholly-owned Perrigo, they could be equally realized if Mylan was only a majority shareholder. Perrigo sought an injunction to block the tender offer pending Mylan’s correction of public shareholder materials containing this claim. Mylan filed a counterclaim, alleging that Perrigo’s statements in connection with the tender offer were false and/or misleading.
Compass Lexecon President Professor Daniel R. Fischel submitted testimony on behalf of Perrigo evaluating Mylan’s claims regarding synergies against the existing economic literature on partial acquisitions and the experiences of relevant benchmark firms, including Mylan’s own prior acquisitions. Professor Fischel demonstrated that there is no basis in the economic evidence to conclude that Mylan could, as it claimed, achieve the same synergies with a partial acquisition as it could if it were able to own all the outstanding shares of Perrigo.
U.S. District Judge Naomi Reice Buchwald agreed with the key finding of the Fischel testimony, writing in the Court’s order that “[o]ur reading of Fischel’s expert report leads us to believe that at least some reduction in operational synergies should be anticipated.” Nevertheless, the Court ruled that Mylan’s statements regarding synergies did not violate public disclosure laws, and consequently denied both Mylan’s and Perrigo’s motions.
After Mylan’s claims about synergies were highlighted in this way, Perrigo shareholders convincingly rejected Mylan’s takeover bid, with less than 40 percent tendering shares to Mylan. In announcing the news, two Wall Street Journal articles stated, “Perrigo Co. wasn’t supposed to be able to defeat Mylan NV’s hostile takeover bid. The Irish takeover rules favor bidders in hostile deals,” and “Perrigo, meanwhile, joins a small club of companies that have successfully beaten back a tender offer on persuasion alone, without traditional corporate defenses.”
The Compass Lexecon team supporting Professor Fischel included Andrew Roper and Clifford Ang in our Silicon Valley office, and Todd Kendall, Jonathan Polonsky and Gregory Pelnar in our Chicago office. Compass Lexecon worked closely with William Savitt, Bradley R. Wilson and Charles D. Cording of Wachtell, Lipton, Rosen & Katz who successfully represented Perrigo.