Perrigos board after repeatedly rejecting mylans

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Perrigo's board after repeatedly rejecting Mylan's offer encouraged its shareholders to reject the Mylan tender offer by noting that it "substantially undervalues our Company and did not ad- equately compensate shareholders for our exceptional standalone growth prospects." The Perrigo board also pointed out that shareholders had realized a 970% total return since 2007, which d\varfed the total return to Mylan shareholders during the same time period. They argued that continuing the firm's current business strategy would be more lucrative than selling to Mylan. Perhaps Perrigo's most effective argument against the Mylan offer was its assertion that the poor governance practices of Mylan would undermine the long-term value of shares that would be received by those tendering their Perrigo shares. Adding suppbrt to Perrigo's claims was the fact that Mylan had consistently received the worst possible governance score from ISS 1 a leading independent proxy advisory firm. In response to Perrigo's allegations, Mylan threatened to delist Perrigo shares if it gained majority control making any such shares outstanding highly illiquid. Perrigo countered that these were just scare tactics and represented another illustration of Mylan's disregard for shareholder rights. L THE MERGERS AND ACQUJSLTIONS ENVillONMENT
124 3. THE CORPORATE TAKEOVER MARKET Despite these challenges, in early November Mylan stated in a press release that it was "highly confident" it would succeed in the takeover. Mylan initially stated that it expected to open a tender offer for as much as 80% of Perrigo's outstanding shares but later reduced that figure to 51 % of outstanding common shares, enough to gain a controlling interest. The reduction in this thresh old figure from 80% to sligl tly more than 50% reflected a more realistic assessment of Mylan's prospects. The deal did not appear to make sense from the outset. Why? It did not involve the more com monly used "friendly approach" in which the acquirer seeks to get support from the target's board and management. Moreover, Mylan would not have realized a spike in earnings per share as a re sult of the deal as the number of new shares issued would offset the addition of Perrigo's earnings. Furthermore, Mylan's acquisition of Perrigo would not have expanded Mylan's share of the overall generic prescription market, as Perrigo dominated only a subsegment of the market for cheaper drugstore brand versions of drugs such as Advil and Neosporin. Why then did Mylan want Per rigo? Acquiring Perrigo would make Mylan a more diversified health care firm helping to offset increasing competition in the generic drug market. Decisions made years earlier had left Perrigo vulnerable to takeover. Perrigo surrendered highly effective defenses when it moved its legal domicile to Ireland. Prior to its corporate inversion, Per rigo had been incorporated in Michigan. Michigan is generally considered to have strong antitake over laws, including a business combination law limiting parties that have acquired 10% or more of the shares of a firm from acquiring the remaining shares for 5 years. Because it would

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