Mylan to acquire up to 71.5% interest in Matrix for $736 million

By E. Janene Geiss

Philadelphia, Aug. 28 - Mylan Laboratories Inc. and Matrix Laboratories Ltd. announced Monday that Mylan will acquire up to 71.5% of Matrix shares outstanding for Rs. 306 per Matrix share.

Under terms of the transaction, Mylan said it will buy 51.5% of Matrix's shares outstanding under an agreement with certain selling shareholders and will make an "open offer" to Matrix's remaining shareholders to acquire up to an additional 20% of Matrix's shares outstanding, according to a company news release.

Assuming the open offer is fully subscribed, the total purchase price is expected to be about $736 million.

Matrix will remain a publicly traded company in India and will continue to operate independently, officials said.

"This acquisition deepens Mylan's vertical integration and enhances its supply chain capabilities," Robert J. Coury, Mylan's vice chairman and chief executive officer, said in the release.

N. Prasad, executive chairman of Matrix, will join Mylan's board of directors and executive management team.

Matrix said the transaction will provide Mylan with a significant presence in important emerging pharmaceutical markets, including India, China and Africa, as well as a European footprint and distribution network through Matrix's Docpharma subsidiary.

By combining Matrix's active pharmaceutical ingredient and drug development business with Mylan's expertise in finished dosage forms, this transaction also will allow Mylan to capture incremental pieces of the value chain through backward vertical integration, officials said.

Under terms of the transaction, approved by Mylan's board of directors, Mylan will acquire all Matrix shares currently owned by Temasek (Mauritius) Pte. Ltd., which is an investment vehicle of Singapore government-owned Temasek Holdings, will acquire Matrix shares from entities controlled by Newbridge Capital, which is a joint venture between Texas Pacific Group and Blum Capital Partners, and from Spandana Foundation.

As part of the same agreement with these shareholders, Mylan said it will acquire shares from Prasad. After the transaction, Prasad will continue to own 5% of Matrix's shares outstanding.

In addition, Mylan will make an open offer to Matrix's remaining shareholders to acquire up to 20% of Matrix's shares outstanding at the same Rs. 306 per share price in cash.

The transaction will be funded using Mylan's existing revolving credit facility and cash on hand, officials said.

A portion of the funds received by Newbridge, Temasek and Prasad will be used to buy newly issued shares of Mylan common stock. Newbridge has agreed to invest about $93 million, Temasek has agreed to invest about $46 million and Prasad has agreed to invest $25 million, each at a price per Mylan share of $20.85 - the average of Mylan closing share prices for the 10 trading days prior to the announcement of the transaction - subject to certain regulatory approvals, officials said.

Mylan said it expects the transaction to be moderately accretive to management's internal earnings estimates in fiscal 2008, the first full fiscal year following the anticipated closing of the transaction, and significantly accretive thereafter.

Mylan reaffirmed its adjusted earnings guidance for fiscal 2007 of $1.35 to $1.55 per diluted share.

The transaction is expected to close in the fourth quarter of 2006, officials said.

Merrill Lynch and DSP Merrill Lynch acted as exclusive financial adviser to Mylan in this transaction.

DSP Merrill Lynch will serve as Mylan's Merchant Banker with regards to the open offer. ABN Amro and UBS Ltd. acted as financial advisers to the selling shareholders.

Mylan is a Pittsburgh pharmaceutical company with three principal subsidiaries: Mylan Pharmaceuticals Inc., Mylan Technologies Inc. and UDL Laboratories Inc.

Matrix is a Hyderabad, India, maker of active pharmaceutical ingredients and solid oral dosage forms.

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