Saturday, August 3, 2019
I often think about this Wall Street Journal article from 2015 about Mylan and its reincorporation to the Netherlands:
At a heated meeting with Mylan NV’s executive team in a Manhattan conference room in May, several investors complained about the drug maker’s resistance to a $40 billion takeover proposal from Teva Pharmaceutical Industries Ltd.
Executive Chairman Robert Coury leaned across the table and retorted, in language laced with expletives, “This is a stakeholder company, not a shareholder company,” according to multiple attendees, meaning his constituents went beyond investors and he wasn’t obligated to agree to a tie-up. Mr. Coury got his way….
Mylan’s resistance to Teva’s proposal was aided by an acquisition that moved the company’s legal home in February from Pennsylvania to the Netherlands—part of the wave of tax-trimming “inversion” transactions that swept American business last year. Mylan, whose senior management remain based in Pennsylvania, gained not just tax savings, but a Dutch corporate rule book that gives companies more levers to resist takeovers….
Dutch policy makers have spent the past decade touting the benefits of Dutch law to global corporations as part of an effort to turn the Netherlands into a management-friendly bastion.
The article’s a bit circumspect about it, but I have always imagined Coury saying something like, “It’s stakeholder, b---,” as he refused to consider Teva’s offer. This, of course, it a lot like Martin Lipton’s longstanding advocacy for a “stakeholder” orientation, from the days of Unocal – when, at his urging, the Delaware Supreme Court held that employee welfare was an appropriate consideration in a takeover battle (before it retconned its own holding the next year in Revlon) – extending to today’s exhortations that corporate managers should protect stakeholder interests. All the right buzzwords of corporate social responsibility and ESG are there, but the fairly transparent endgame is to make boards less accountable to shareholders, not more accountable to other constituencies.
Anyhoo, I mention all of this because it’s the first thing that occurred to me when the news broke about Pfizer’s new combination with Mylan. Pfizer will spinoff its Upjohn unit to combine it with Mylan, and shareholders of both Mylan and Pfizer will receive stock in the new company. Significantly, the combined entity will incorporate in Delaware, thus removing some of the insulation that Coury has enjoyed over the past few years (despite his intention, described in the above-linked article, to maintain his role as Executive Chair).
Given Mylan’s poor performance recently – and associated shareholder restiveness – perhaps this move was inevitable. As I previously noted in the case of Netflix, it seems like public companies can only wall off their shareholders for so long, especially as performance declines – which is exactly when shareholders are going to want to flex their muscles.