Teva's Deal for Mylan Shows Corporate Israel's M&A Hunger

By Nicholas Casey And Orr Hirschauge 

TEL AVIV-- Teva Pharmaceutical Industries Ltd.'s $40 billion offer for Mylan NV marks corporate Israel's biggest foreign foray and caps years of hand-wringing about the inability of the country to nurture big multinationals, analysts say.

Israel, the self-proclaimed "Start-up Nation," has built a reputation as a hub of tech and biotech companies, quickly assembled and sold to foreign firms looking to grow. Recent success stories have included Annapurna Labs Ltd., sold to Amazon.com Inc., and CyActive Ltd., sold to eBay Inc.'s PayPal, this year.

Less noticed, however, are the public companies in Israel that have been hungry for foreign acquisitions. Teva alone has made more than a dozen large deals in recent years, including a $3.5 billion pending deal for U.S.-based Auspex Pharmaceuticals Inc. announced on March 30.

"I would say there's been quite a trend over here in Israel for companies to acquire," said Jonathan Kreizman, a pharmaceuticals analyst at Clal Finance a nonbank financial group in Israel. Just as Israel's small size has made it a good incubator for small firms, it means mature companies must go looking abroad for sources of growth, Mr. Kreizman said.

Teva's precursor, a drug wholesaler called Salomon, Levin and Elstein, was founded in Jerusalem in 1901.

It became known as Teva--a Hebrew name meaning "Nature"--in the 1930s not long before the modern state of Israel was established.

Teva is a source of pride in Israel today, now the largest company by market capitalization on the Tel Aviv Stock Exchange and a big employer domestically, with 7,000 employees in Israel and more than 40,000 employees world-wide.

"By all parameters Teva is the biggest Israel-based commercial company. It also has a symbolic importance showing that a company that has its headquarters in Israel and most of its research and development done in the country can become a dominant global player in its field," said Israeli economist Manuel Trajtenberg, a former head of the Israeli National Economic Council, and a current member of the Israeli parliament.

Ronny Gal, an analyst at Sanford Bernstein, said recent public offerings could mean that more Israeli companies may follow in Teva's footsteps. "The fact that many Israeli companies have gone public in the last two years does suggest that more Israeli companies will become acquirers," he said.

Mr. Gal said one problem in the past was that Israel was thin on seasoned managers needed to shepherd acquisitions. But that is changing, he said, "Now you see serious managers in Israel that are much more confident and have much more international experience."

Write to Nicholas Casey at [e-mail] and Orr Hirschauge at [e-mail]

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