What's Gabelli Saying About Teva Now?

In a report published Wednesday, Gabelli & Company analyst Kevin Kedra commented on Teva Pharmaceutical Industries Ltd (NYSE: TEVA)'s offer to acquire Mylan NV (NASDAQ: MYL) for $82 per share.

Teva argued that the acquisition could realize $2 billion of synergies, resulting in $10 billion combined EBITDA in 2016 and earnings per share accretion approaching 30 percent by the third year.

According to Kedra, the hunter becomes the hunted as Teva's offer comes just two weeks after Mylan disclosed its own offer to acquire Perrigo Company plc Ordinary Shares (NYSE: PRGO). The analyst added that before Teva's offer, Mylan had publicly rejected the idea of combining with Teva as product overlap and cultural issues are potential roadblocks.

"We expect Mylan to make the next move in this standoff by increasing its offer to Perrigo and seeking a friendly deal to defend against a Teva takeover," Kedra wrote. "If Mylan can reach an agreement with Perrigo, we believe that Teva's current offer would be insufficient to complete a deal. Unless Teva is willing to offer $90+ per share for Mylan, we believe that there is a low probability that Teva will be successful."

Kedra continued, noting that even if Teva were to acquire Mylan for more than $90 per share, the acquisition would still be "significantly" accretive. In fact, a joint combination could result in the company earned $6.50 per share in 2018.

Nevertheless, the analyst stated that Teva remains the cheapest name in its group, trading at 10.5x EBITDA and 12.5x adjusted earnings for 2015. While an acquisition of Mylan could be "transformative" and unlock additional shareholder value, Teva could still pursue alternate transaction that would result in near-term synergies if it Mylan successfully fends off being acquired.

Shares of Teva remain Buy rated with an unchanged $76 price target.