U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
NOTICE OF EXEMPT SOLICITATION
1. Name of the Registrant:
Mylan Laboratories Inc.
2. Name of person relying on exemption:
UBS Global Asset Management (Americas) Inc.
3. Address of person relying on exemption:
UBS Tower
One North Wacker Drive
Chicago, Illinois 60606
4. Written materials. The following written materials are
attached:
Exhibit 1: Letter, dated October 12, 2004, from John C.
Leonard, Head of North American Equity Securities for
UBS Global Asset Management (Americas) Inc., to Milan
Puskar, Chairman of the Board of Directors of Mylan
Laboratories Inc.
Exhibit 1
[Letterhead for UBS Global Asset Management (Americas) Inc.]
October 12, 2004
Via Federal Express
Mr. Milan Puskar
Chairman of the Board of Directors
Mylan Laboratories, Inc.
1500 Corporate Drive
Canonsburg, PA 15317
Mr. Puskar:
We are writing to you as representatives of our clients on whose
behalf we have purchased shares of Mylan common stock. We wish
to inform you of our concerns stemming from Management's proposed
issuance of Mylan common stock to shareholders of King
Pharmaceuticals, Incorporated, pursuant to the merger
contemplated by the Agreement and Plan of Merger, dated July 23,
2004. We believe the proposed King acquisition on the terms
announced not only is dilutive of long term economic value for
Mylan shareholders, but also raises the potential for a
suboptimal execution on the Nebivolol launch, due both to a lack
of clinical/commercial resources from the combined entity and an
unprecedented level of integration distractions.
Mylan management stated in its introductory comments on the July
26th conference call announcing this proposed transaction, "King
gives us an attractive brand portfolio that, when leveraged with
Mylan's capabilities, will diversify our revenue stream. We
believe that this combination creates a greater growth potential
and reduced risk for our shareholders through a better balance of
our businesses." We disagree with management's statement for the
following reasons:
1). This proposed transaction appears highly dilutive to Mylan
Shareholders. Our own internal financial models indicate that
this transaction would prove highly dilutive to GAAP Earnings per
Share in the out years of our five year modeling horizon,
irrespective of any short term NON GAAP earnings accretion which
may occur.
The Mylan and King Management teams' own forecasts correlate with
our own projections. Goldman Sachs, in developing a fairness
opinion of this proposed transaction, and relying upon a
Discounted Cash Flow analysis "using the King forecasts, the
Mylan forecasts and estimates of the cost and operational
synergies prepared by the managements of King and Mylan"1,
calculated the following ranges of implied present values per
share for King ($8.55-$11.80), Mylan ($19.40-29.07) and the
Proforma Combined Company ($15.23-$22.51), respectively.
2). We remain convinced that Mylan Management's stated
expectation for a re-valuation of its common shares by investors
under a metric of "Proforma" earnings is ill-founded and unlikely
to occur. As we've shared this concern with Mr. Coury at both of
our recent meetings, we base this conclusion upon our examination
of other significant dilutive mergers in the
pharmaceutical/biotech industry over the past several years. We
continue to believe that investors will refuse to reward
pharmaceutical companies seeking to downplay the relative
importance of "non-cash" intangible amortization, for as these
assets expire over time, they have a deleterious cash implication
for the business going forward. More specific to Mylan, given
the following considerations:
- The extraordinary magnitude of the intangibles ($2.214B)
from the projected allocation of the proposed purchase price
($3.729B);
- The rapidly approaching exclusivity losses in the King
product portfolio; and
- The lack of any meaningful King new product pipeline to help
offset these impending and material losses in revenues and
profit.
We have little confidence that investors will now choose to
ignore this dilution, given historical precedents and commonly
applied valuation methodologies.
3). The King transaction's primary purported strategic benefit,
namely a "pay as you go" launch strategy for Mylan's Nebivolol,
appears questionable at present. We have conducted what we
believe to be extensive scientific and commercial due diligence
on Nebivolol these past 15 months, and assuming proper clinical
development programs and commercial execution, we share in Mr.
Coury's enthusiasm for the clinical profile and commercial
prospects for Nebivolol. However, as a historical acquirer of
third party branded pharmaceutical products, King lacks any
clinical development capabilities in either field (heart failure
or osteoporosis) for which Nebivolol has potential incremental
clinical utility. Moreover, last month's lawsuit filed by Wyeth
against King gives us a great deal of concern that the King
cardiovascular sales force may prove incapable of launching and
promoting Nebivolol with the required levels of manpower
necessary for success in the highly competitive domestic
cardiovascular marketplace.
4). Finally, the integration and management distractions from
this proposed transaction appear extremely onerous. These
distractions seem to us an unnecessary burden, particularly as
Mylan management appears highly focused on their core generic and
branded business opportunities.
Accordingly, we do not believe that the proposed acquisition of
King is in the best interests of our clients. We would welcome
an opportunity to discuss our stance in this regard with you or
other members of the Mylan Board of Directors.
Sincerely,
/s/ John C. Leonard
John C. Leonard, CFA
Head of North American Equities
UBS Global Asset Management
CC:
Board of Directors of Mylan Laboratories Inc. c/o Roger L.
Foster, Senior Vice President, General Counsel & Secretary
Chris Young, ISS
Carl Icahn, Icahn & Company
Blake Grossman, Barclay's Global Investors
Alan Brown, State Street Global Advisors
Gus Sauter, The Vanguard Group, Inc.
Kevin Ferguson, Lord, Abbett & Company
James Terrile, Capital Research & Management Company
Lori Bertner, Putnam Investment Management, Inc.
Andrew C. Stevens, Artisan Partners L.P.
_______________________________
1 Discounted Cash Flow Analysis, pp. 48-49, Form S-4, Mylan
Laboratories Inc, September 03, 2004