To fend off a hostile takeover by corporate raider Carl Icahn, pharmaceutical giant Mylan Laboratories Inc. announced that it will double its dividend and repurchase about one-quarter of its shares.
The Canonsburg, Pennsylvania-based company stated that a $1.25 billion share buyback will consist of a modified Dutch auction self-tender for up to 48.8 million shares, or up to $1 billion, in which shareholders will have the opportunity to tender stock at between $18 and $20.50 per share. A $250 million follow-on share repurchase program in the open market will amount to nearly 25 percent of the company’s outstanding shares.
Mylan added that it will double its dividend to 24 cents per share, effective as of the first quarter ending June 30, 2005.
The company stated that it has obtained a letter from Merrill Lynch for $975 million in commitments, of which $775 million (plus cash on hand) will be used to finance the tender and the repurchase program.
Vice chairman and chief executive officer Robert J. Coury said in a statement that these moves are designed, in part, to optimize shareholder value. “We believe that the Dutch auction self-tender and follow-on buyback properly creates the right balance between doing what is right for our business and delivering value to our shareholders,” he added. “The sheer magnitude of this buyback will enhance the impact to earnings per share going forward of any and all new opportunities that we add to our existing base.”
Coury added that the big boost in the dividend “reflects our long-standing commitment to focus on total return to shareholders, by striking a strong balance between share appreciation and our dividend.”
Earlier this year, Mylan abandoned a $4 billion acquisition of King Pharmaceuticals Inc., designed to help Mylan strengthen its branded drug business, after King announced an earnings restatement. Mylan also announced yesterday that it would discontinue its branded lines.
Wall Street had never looked favorably on the merger, and Icahn — who owns about 10 percent of Mylan’s stock — has offered to buy Mylan for $20 per share. In addition, the raider has put up 11 candidates for election to Mylan’s board of directors at the company’s next annual meeting, scheduled for October.