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Key investor blasts Mylan-King merger

| Thursday, Oct. 14, 2004

Carl Icahn has gained a powerful ally in his effort to quash Mylan Laboratories Inc.'s $4 billion acquisition of King Pharmaceuticals Inc.

UBS Global Asset Management, Mylan's second-largest shareholder behind Icahn, sent a letter Tuesday to company Chairman Milan Puskar in which John C. Leonard, head of North American Equity Securities for UBS, denounced the deal as too dilutive to shareholders.

Leonard also questioned King's ability to help bring Mylan's much-anticipated new hypertension drug, nebivolol, to market early next year upon receiving Food and Drug Administration approval.

Mylan responded Wednesday chiding UBS for making the letter public before Mylan's scheduled Nov. 1 conference call, where it will outline an earnings forecast for the combined company and its plans for launching nebivolol -- after which it will conduct a series of meetings to explain the King deal to investors.

"UBS' position is not news to us .... We are confident that the financial guidance that will be provided on Nov. 1 will illustrate that this transaction is accretive on a cash (earnings per share) basis and represents the best strategy for maximizing the nebivolol opportunity," Chief Executive Robert Coury said in a statement.

In a reply letter to Leonard, Puskar reiterated the company's "firm belief" that the combined company will grow at a faster rate than Mylan on its own.

Mylan has said its mainstay generics business is eroding as brand-name drug companies abuse loopholes in patent laws.

The King acquisition, it believes, will balance Mylan's generics business with a brand-name component with cardiology as the primary focus.

Coury has said the 1,200-member sales force at Bristol, Tenn.-based King is the strategic key to the acquisition.

Coury argues that the sales force, subsidized by King's Altace heart medication, with $1.5 billion in 2003 sales, will be able to more effectively promote nebivolol to cardiologists than a sales force Mylan would have to build from scratch.

UBS, a global money management fund, owns about 10.5 million Mylan shares, or roughly 4 percent of the company, on behalf of its clients.

Together with Icahn, who has acquired nearly 24 million Mylan shares since the King deal was announced July 26, the two camps control the votes of about 13 percent of the company.

Leonard also sent his letter to seven of Mylan's other large institutional shareholders, which together with UBS and Icahn control about 30 percent of the company. None of the seven could be reached for comment yesterday.

Mylan needs a majority of the total votes cast in a shareholders vote expected later next month in order to close the deal, or possibly face an $85 million break-up fee.

Coury has been meeting with Mylan's top shareholders in recent weeks, including Icahn, to drum up support. Leonard provides Icahn a hammer with which to pound other fund managers to oppose the deal.

Icahn could not be reached for comment.

Some analysts say Leonard's opposition to the deal could convince other large institutions to withhold their support. If this happens, Mylan and King could opt to renegotiate the deal at a lower price that could include Mylan putting some of its roughly $700 million in cash in the deal, making it less dilutive to its shares.

Mylan stock closed up 45 cents yesterday at $17.76. King fell 71 cents to $11.45.

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