Photograph by Kris Tripplaar — Sipa USA/AP
By Jen Wieczner
April 22, 2015

Mylan CEO Heather Bresch had a heck of a day on Tuesday. Here’s how it went: Shortly before 9 a.m. New York time (and before U.S. markets opened), generic drug giant Teva Pharmaceutical (TEVA) confirmed its unwelcome bid to acquire rival Mylan (MYL) for $40 billion. In its official presentation of the offer, Teva argued that its proposed deal was a “superior alternative” to Mylan’s own unsolicited attempt to buy Irish pharma firm Perrigo (PRGO) for $29 billion, announced earlier this month.

By the end of the day, Perrigo had basically reached the same conclusion: Just after U.S. markets closed at 4 p.m. on Tuesday, Perrigo announced that its board of directors unanimously rejected Mylan’s bid, saying it “substantially undervalues” the company and is not in its shareholders’ best interests. Mylan’s shares, which had soared nearly 9% during regular trading on Teva’s offer, briefly trended lower after-hours, while Perrigo’s shares ended the day down almost 3%.

The corporate dueling sets the stage for what could become the most dramatic hostile takeover battle since last year’s unsolicited attempt by drugmaker Valeant (VRX) to acquire Allergan, which was ultimately acquired by Actavis (ACT). Both Teva’s and Perrigo’s announcements Tuesday went against Mylan’s wishes, making Mylan a sort of monkey-in-the-middle amid the companies’ competing desires. Teva could also become an unlikely white knight for Perrigo as it seeks to fend off Mylan, because Teva’s proposed acquisition of Mylan hinges on the Perrigo deal’s collapse, Teva said in its presentation.

Mylan, meanwhile, has already gone out of its way to rebuff Teva. As rumors of Teva’s bid intensified last week, Mylan went against its own policy of not commenting on speculation and issued a press release saying that it would oppose a deal with Teva—even before the offer was officially announced. “We have studied the potential combination of Mylan and Teva for some time and we believe it is clear that such a combination is without sound industrial logic or cultural fit,” Mylan Executive Chairman Robert Coury said in the statement. The company is “fully committed” to its strategy as an independent company, as well as its bid for Perrigo, he said.

Besides, Coury added, a merger between Mylan and Teva could raise monopoly issues, and government officials probably wouldn’t approve it anyway: “We believe that it is unlikely that any such combination could obtain anti-trust regulatory clearances,” he said in the statement.

Still, analysts have been expecting more M&A among generic drugmakers as the entire pharmaceutical industry has been consolidating rapidly in the past couple of years. Many of the recent Big Pharma deals and acquisition proposals have been motivated by the companies’ desire to lower their tax rate by acquiring a foreign rival and moving their headquarters overseas in a process known as an inversion.

But a tax inversion does not appear to be the driving factor in either Teva’s bid for Mylan or Mylan’s for Perrigo. That’s because none of the three companies are currently based in the U.S. Mylan quietly inverted to the Netherlands in February after buying some of Abbott Laboratories’ (ABT) foreign assets (as a result, it will no longer be eligible for the Fortune 500, on which it ranked No. 377 in 2014). And Perrigo relocated to Dublin after buying drugmaker Elan in 2013.

Teva, for its part, is headquartered in Israel, though of the three companies, it stands to gain the biggest tax benefit if its proposed acquisition is successful: The company said that buying Mylan would allow it to reap $2 billion per year in tax savings and other “cost synergies.”

Those savings would be such a boon to Teva, it would be as if the company had launched another blockbuster drug, “with exclusivity extending into perpetuity,” analysts at investment back Cowen wrote in a research note. “It can be argued that this alone is worth roughly $20B.”

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