Case | HBS Case Collection | February 2014

Mylan Laboratories' Proposed Merger with King Pharmaceutical

by Lucy White and Matt Kozlowski

Abstract

Perry Capital owns shares in King and, to facilitate approval of the merger, buys shares in Mylan, whilst hedging out its economic exposure to Mylan's share price using derivatives. The price at which Mylan proposes to merge with King is generous to King shareholders, but the merger does not look likely to be approved by Mylan shareholders, who must vote upon it. If Perry can swing the voting in favor of the deal, it will gain handsomely on its King shares without facing any corresponding losses on its Mylan holdings since those are hedged. Carl Icahn, another shareholder in Mylan, opposed the deal and sued Perry for alleged vote buying.

Keywords: Mergers and Acquisitions; Voting; Ethics; Stock Shares; Investment; Lawsuits and Litigation; Ownership Stake;

Citation:

White, Lucy, and Matt Kozlowski. "Mylan Laboratories' Proposed Merger with King Pharmaceutical." Harvard Business School Case 214-078, February 2014.