April 22, 2015 / 1:13 PM / 2 years ago

Teva's turnaround CEO sets sights on $40 billion mega-deal

A sign bearing the logo of Teva Pharmaceutical Industries is seen in its Jerusalem oral solid dosage plant (OSD) December 21, 2011. REUTERS/Ronen Zvulun

TEL AVIV (Reuters) - Israeli turnaround specialist Erez Vigodman, the chief executive of Teva Pharmaceutical Industries (TEVA.N), is looking to pull off the ultimate transformation with the biggest deal in Israel’s corporate history.

His unsolicited $40 billion offer for smaller generic drug rival Mylan Inc (MYL.O) is Vigodman’s attempt to turn Teva into a global drug powerhouse with a $100 billion market valuation, a far cry from its start as a small wholesale drug business in Jerusalem more than a century ago.

Despite having no pharmaceutical experience, Vigodman, 55, was hired by Teva in February last year after he had turned around MA Industries, an Israeli agro-chemicals group. A certified public accountant and graduate of the program of management development at Harvard’s business school, he was tasked with cutting costs and improving profits in the face of rising competition.

“He is a change agent with an impressive strategic mindset and a proven ability to execute restructuring programs,” Teva board member Amir Elstein has said of Vigodman.

At MA Industries, today called Adama, Vigodman restored profitability and invested in growth areas.

In 2010 he tried to buy U.S.-based Albaugh for $1 billion but when analysts and investors criticized the high price, Vigodman pulled the offer.

Instead, in 2011 he orchestrated a reverse merger with China National Chemical Corp, giving MA access to China.

Prior to that, during his tenure as CEO of Strauss Group from 2001-2009, sales at Israel’s second-largest food company more than doubled.

Benny Landa, an industrialist who led an investor bid last year to shake up Teva’s board, has called Vigodman “a strategic thinker with excellent managerial skills ... a straight shooter whom the Street will learn to trust.”

At Teva, after slashing debt by $2 billion, selling some plants and shutting others, the company’s stock price has soared and this February Vigodman said Teva was ready to return to making acquisitions. Last month he announced the $3.5 billion purchase of U.S. firm Auspex Pharmaceuticals.

Teva (TEVA.TA), Israel’s biggest company, has grown through a series of large acquisitions over the past two decades, reaching annual sales of $20 billion, but its bid for Mylan is of a scale unprecedented in Israel’s corporate history - equal to 15 percent of the high-tech country’s economy.

It is an audacious bid from a company facing generic competition for its biggest money maker, the multiple sclerosis drug Copaxone, whose patent expires this year. Analysts have talked of the need for Vigodman to find a new growth engine through a “transformational” deal and some had picked Pennsylvania-based Mylan as Teva’s best option.

Vigodman now has a battle on his hands. He may need to significantly sweeten the offer and needs to win over Mylan’s shareholders to clinch a deal.

Mylan’s Executive Chairman Robert Coury has said the combination of Teva and Mylan was “without sound industrial logic or cultural fit”.

Landa has also questioned the logic.

“I understand the short-term attractiveness of being a $100 billion company and saving costs, but I don’t get it strategically,” Landa said.

Additional reporting by Ari Rabinovitch

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