NEW YORK (TheStreet) -- Mylan (MYL) - Get Report shares are spiking 9.37% to $65.13 in trading on Wednesday after the company proposed to acquire Perrigo Co. (PRGO) - Get Report with Perrigo shareholders receiving $205 in cash and stock for every share they own, a 25% premium over the stock's closing price on Friday.
"The combination of these highly complementary businesses would produce a company with critical mass in specialty brands, generics, over-the-counter (OTC) and nutritional products; a powerful commercial platform with reach across all customer channels; an exceptional high-quality operating platform; and opportunities to generate enhanced growth and deliver significant immediate and long-term value and benefits for shareholders and the other stakeholders of both companies," Mylan said in a statement.
Mylan emphasized that this is only a proposal and not an announcement of a firm intention to make an offer under Ireland's regulatory rules.
Mylan shares were climbing before the announcement of its proposal to purchase Perrigo following an analyst note from JPMorgan this morning where the company's price target was raised to $70 from $66.
"With MYL having pulled back from its recent highs and the company at a cross-roads, in our view, with an "eat or be eaten" dynamic playing out in Specialty Pharma, we wanted to share our latest thoughts on the stock. Overall, we see an increasingly attractive set-up in MYL shares with solid organic growth prospects (12% EPS CAGR from 2014-2018, despite generic Epipen), coupled with significant M&A optionality and inexpensive valuation (~13x our 2016 EPS)," JPMorgan analyst Chris Schott.
TheStreet Ratings team rates MYLAN NV as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:
"We rate MYLAN NV (MYL) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, reasonable valuation levels, solid stock price performance and increase in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 8.3%. Since the same quarter one year prior, revenues rose by 15.2%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The stock has not only risen over the past year, it has done so at a faster pace than the S&P 500, reflecting the earnings growth and other positive factors similar to those we have cited here. Looking ahead, unless broad bear market conditions prevail, we still see more upside potential for this stock, despite the fact that it has already risen over the past year.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Pharmaceuticals industry and the overall market, MYLAN NV's return on equity significantly exceeds that of both the industry average and the S&P 500.
- The net income growth from the same quarter one year ago has significantly exceeded that of the Pharmaceuticals industry average, but is less than that of the S&P 500. The net income increased by 5.0% when compared to the same quarter one year prior, going from $180.23 million to $189.20 million.
- You can view the full analysis from the report here: MYL Ratings Report