Mylan/King deal off

Mylan Laboratories is facing a boardroom battle after the US generics company ditched a $4bn all-stock offer for drugs distributor King Pharmaceuticals.

The companies called off the deal on February 27, citing a failure to agree terms. Since the deal was announced in July last year, it has been in jeopardy; a crucial blow came in December 2004, when King revealed it would have to restate its earnings from 2002 to mid-2004.

The agreement has also incurred the wrath of billionaire financier and Mylan shareholder Carl Icahn, who always opposed Mylan's plan to merge with King and has since reiterated a $5.4bn offer to buy the firm outright. Referring to the collapse of the acquisition as a ìvictoryî, he has also drawn up a list of suggested replacements for the board of directors in which he says he has lost confidence.

ìShareholders must speak out when management is pursuing a course of action that they object to,î he said. ìIn this case, we believed that the King transaction would have been a serious and possibly fatal mistake for Mylan.î

Icahn's all-male slate of directors includes himself and 10 associates, eight of which either work for him directly, or are directors at companies where he is involved.

Mylan vice-chairman and chief executive, Robert Coury, accused Icahn of trying to take credit for terminating the King acquisition.

ìThe board's deliberations have never been, and never will be, unduly influenced by Mr Icahn or any other external pressures,î he said in a statement.

CIBC analyst Elliot Wilbur said Mylan remained ìtakeover baitî in the generic industry, where consolidation is expected to gain momentum over the next two years. Last week, Novartis staked its claim to become the major generics player by agreeing to buy Germany's Hexal and Eon Labs of the US for more than $8bn.

Mylan shares rose by 66 cents to $17.60 on news of the King deal's demise. In a March 10 conference call to investors, the company plans to provide financial guidance and answer questions on its experimental hypertension drug, Nebivolol, for which it is still seeking a marketing partner.

Analysts said the future looked bleak for King, who said it was repositioning for growth, including a revamping of the sales and R&D departments.