More Opposition to Mylan-King Deal

Mylan's second largest shareholder says the deal dilutes long-term economic value.
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The second largest shareholder of

Mylan Laboratories

(MYL) - Get Report

has joined investor Carl C. Icahn in opposing Mylan's proposed acquisition of

King Pharmaceuticals



UBS Global Asset Management wrote to Mylan Tuesday saying that "we do not believe that the proposed acquisition ... is in the best interests of our clients," according to a document filed Wednesday with the

Securities and Exchange Commission

. UBS owns 10.5 million shares, or 3.9%, of Mylan's stock as of June, according to the latest available data.

Icahn, who began buying Mylan's stock on July 26,

the day Mylan said it wanted to acquire King, now holds 23.9 million shares, or 8.9%, of Mylan's stock.

"UBS's position is not new to us," said Robert J. Coury, vice chairman and CEO of Mylan, in a prepared statement. He characterized the UBS letter as "premature" because Mylan will embark on a campaign Nov. 1 to convince investors that the King deal makes economic sense.

"We are convinced that the financial guidance that will be provided Nov. 1 will illustrate that this transaction is accretive on a cash earnings-per-share basis," Coury said.

However, UBS believes that the deal "is dilutive of long term economic value for Mylan shareholders," said John C. Leonard, head of North American equities at UBS Global Asset Management, in his Tuesday letter to Mylan's chairman Milan Puskar.

Leonard said his firm has expressed its concerns with Coury at two recent meetings. Leonard said that King Pharmaceutical is facing "rapidly approaching exclusivity losses" on some products, adding that the company lacks "any meaningful ... new-product pipeline to help offset these impending and material losses in revenues and profit."

On July 26, Mylan said it would purchase King in a stock swap valued at about $4 billion. Mylan said it would pay 0.9 shares of its stock for each share of King's. On the July 23, the last trading day before the deal, Mylan's stock closed at $18.51, valuing each share of King at $16.66. That would have placed a 61% premium on King's stock, which closed at $10.37 on July 23.

Mylan's stock has bounced up and down since the deal was announced, moving up after each report that Icahn had acquired more stock. King's stock, however, has never approached the $16.66 level.

On Wednesday, Mylan's stock gained 50 cents, or 2.9%, to $17.81 while King's shares dropped 63 cents, or 5.2%, to $11.53.