Citi Asks: Is A Mylan-Perrigo Merger Smart?

Citi issued an industry update after reports that Mylan NV (NASDAQ: MYL) proposed to acquire Perrigo Company (NYSE: PRGO) for $205 per share. Citi rates Mylan as Neutral with a $54 target price.

Analysts Liav Abraham and Timothy Li wrote, "Mylan has indicated its intent to continue to pursue inorganic growth, though a potential Mylan-Perrigo combination is not obviously strategic to us given Mylan's lack of presence in the OTC space....however we note that an acquisition of PRGO would afford Mylan diversification away from EpiPen, a higher organic growth profile, and EPS accretion."

Related Link: And The Winner From The Mylan-Perrigo Merger Is... Teva?

Citi notes that while it is unclear whether Mylan's bid for Perrigo will go hostile, under the Irish Takeover Code, companies exposed to hostile takeovers are unable to adopt poison pills. Value on the deal will most likely depend on the level of synergy capture, which is likely to be limited to Perrigo's Pharmaceutical business.