Source: Perrigo, Facebook.

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of both generic drugmaker Mylan (NASDAQ:MYL) and over-the-counter/generic drugmaker Perrigo (NYSE:PRGO) are soaring in intraday trading this Wednesday following a buyout offer from Mylan to acquire Perrigo. Mylan shares rose as much as 17%, while Perrigo shares jumped as much as 31% from its closing price on Tuesday.

So what: According to the press release from Mylan, which occurred two hours after the market opened, it proposed to acquire Perrigo for $205 per share in a cash and stock deal -- a better than 25% premium from where Perrigo ended last Friday. As the press release also notes, this proposal is non-binding under Irish takeover regulations, meaning Mylan could back away from its offer without any financial repercussions.

Based on the proposal letter, Mylan highlighted benefits from a combination that would include stability and increased opportunities for their employees, greater scale and free cash flow, improved access to generic medications for patients, strong R&D capabilities and a diverse product portfolio, and of course, a big benefit to existing shareholders in both companies.

Source: Perrigo, Facebook.

Now what: First things first, investors have to realize that this proposal is non-binding. While it's clear that Mylan is interested in Perrigo, and Perrigo's management team hasn't exactly thwarted Mylan's intentions, a due diligence review, or any other number of factors could change Mylan's view of Perrigo and squash the deal.

But, overall I believe the deal makes sense. A bigger company should allow Mylan/Perrigo to potentially negotiate better prices for its generic products, or perhaps even forge long-term exclusive drug contracts with pharmacy-benefit managers. Even with the premium being offered to Perrigo, its PEG ratio remains below two, which in my book would signify that Mylan is getting a pretty good deal.

To be upfront, I liked Mylan as a stock to buy and hold over the long-term before the deal, but would be especially intrigued if it can officially land Perrigo. I'd probably hold off on chasing shares in Perrigo as the deal could still fall through, but even following the double-digit percentage pop in Mylan I'd suggest long-term investors could still consider opening or adding to their existing position.