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Perrigo's board after repeatedly rejecting Mylan's offer encouraged its shareholders to rejectthe 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 Perrigoboard also pointed out that shareholders had realized a 970% total return since 2007, which d\varfedthe total return to Mylan shareholders during the same time period. They argued that continuingthe 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 thepoor governance practices of Mylan would undermine the long-term value of shares that wouldbe received by those tendering their Perrigo shares. Adding suppbrt to Perrigo's claims was the factthat Mylan had consistently received the worst possible governance score from ISS1a leadingindependent proxy advisory firm. In response to Perrigo's allegations, Mylan threatened to delistPerrigo 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'sdisregard for shareholder rights.L THE MERGERS AND ACQUJSLTIONS ENVillONMENT
1243. THE CORPORATE TAKEOVER MARKETDespite these challenges, in early November Mylan stated in a press release that it was "highlyconfident" it would succeed in the takeover. Mylan initially stated that it expected to open a tenderoffer for as much as 80% of Perrigo's outstanding shares but later reduced that figure to 51% ofoutstanding common shares, enough to gain a controlling interest. The reduction in this threshold figure from 80% to sligl tly more than 50% reflected a more realistic assessment of Mylan'sprospects.The deal did not appear to make sense from the outset. Why? It did not involve the more commonly used "friendly approach" in which the acquirer seeks to get support from the target'sboard and management. Moreover, Mylan would not have realized a spike in earnings per shareas a re sult of the deal as the number of new shares issued would offset the addition of Perrigo'searnings. Furthermore, Mylan's acquisition of Perrigo would not have expanded Mylan's share ofthe overall generic prescription market, as Perrigo dominated only a subsegment of the marketfor cheaper drugstore brand versions of drugs such as Advil and Neosporin. Why then did Mylanwant Per rigo? Acquiring Perrigo would make Mylan a more diversified health care firm helpingto offset increasing competition in the generic drug market.Decisions made years earlier had left Perrigo vulnerable to takeover. Perrigo surrendered highlyeffective 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 strongantitake 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