Sector News

How An Inversion Is Paying Off Twice In Mylan’s Fight Against Teva Pharmaceutical

June 17, 2015
Life sciences
When Mylan entered a so-called ‘spin-version’ transaction last year in a deal where it acquired a $5.3 billion generics business from Abbott Laboratories and shifted its headquarters from Pittsburgh to The Netherlands, little did the pharma giant know the move would help it fend off an unfriendly $40 billion takeover bid from competitor Teva Pharmaceuticals.
 
But, that’s exactly what may happen.
 
Mylan’s July 2014 deal with Abbott had two objectives. First off, it bolstered the company’s presence in the global generics marketplace where manufacturers like Canada-based Valeant Pharmaceuticals , Isreal’s Teva Pharmaceuticals, and India-based Ranbaxy Laboratories have picked up share as larger conglomerates like Abbott and Pfizer exit and refocus on their drug pipelines. The deal also was part of a 2014 mad dash in the U.S. to use M&A as a means to shift corporate headquarters into low-tax jurisdictions, predominantly in Europe and the U.K.
 
To gain the tax benefits of an inversion transaction, however, Mylan had to structure the deal so that Abbott would own over 20% of the stock in the new Netherlands-based parent. As a result, Mylan doled out 105 million of its shares to Abbott to complete the mega deal, which came with hundreds of millions of dollars in tax and operational synergies.
 
Since the deal was announced, Mylan shares have risen over 40%, keeping pace with the red hot pharmaceutical sector, as drug-makers continue a consolidation push to wrench out financial synergies. [Most deals these days lure investors with mid-teens-to-20% earnings and cash flow accretion forecasts, and they’ve drawn major interest from the largest hedge funds in the world]
 
But Abbott’s 21% block of shares — now down to 14.5% after some sales on the open market — is proving helpful for Mylan.
 
On Tuesday morning, Abbott Labs expressed its intention to vote its shares in favor of Mylan’s about $30 billion bid for Irish-domiciled competitor Perrigo . Those votes may help Mylan fend off Teva Pharmaceuticals, which is pitching a competing deal to its shareholders.
 
“[B]y having a large, sympathetic shareholder on the scene, it becomes a lot easier to discourage unwanted takeover efforts. That becomes a hidden benefit of the type of inversion that Mylan accomplished,” says Robert Willens, an independent tax expert.
 
Teva wants Mylan to tear up its unsolicited bid for Perrigo and instead engage in merger talks. Perrigo hasn’t yet expressed an interest in negotiating a merger with Mylan, however, because of Irish takeover laws that’s a moot point since Mylan is now legally bound launch a tender. Teva, meanwhile, continues to press a case that its deal offers far greater synergies and financial benefits than the Perrigo transaction.
 
But, Mylan appears skeptical of Teva as a suitor, given it’s relatively weak stock and operational performance in recent years.
 
At times, it’s even used what Wall Street bankers describe as an exceedingly condescending tone when trying to fend off Teva’s unsolicited offer. Most of the time in pharma M&A, unsolicited bids turn into negotiated deals once a suitor shows a willingness to cut a check that board of the target simply can’t refuse.
 
That may not be the case in a triangular deal frenzy that’s hooked Mylan, Perrigo and Teva at the hip. In addition to complex takeover laws in The Netherlands and Israel, Abbott’s block of shares may prove a hurdle too high to climb for Teva.
 
Who knew a controversial inversion deal would continue paying dividends for Mylan, even after its tax savings were achieved?
 
By Antoine Gara
 
Source: Forbes
comments closed

Related News

May 10, 2025

FDA approves Teal Health HPV screening test as an at-home alternative to the Pap smear

Life sciences

According to a study conducted by the company that included more than 600 participants, samples collected with the Teal Wand were shown to be just as accurate as those taken by a clinician during an office visit. About 94% of participants said they would opt for self-collection in the future, and 86% said they felt they would be more likely to stay up to date with cervical cancer screening if they could do it at home.

May 10, 2025

FDA appoints first chief AI officer as it looks to speed up reviews

Life sciences

Jeremy Walsh was named head of IT and AI, according to his post on LinkedIn. The move was first reported by Politico. Walsh previously held the role of chief technologist at Booz Allen Hamilton, managing AI- and cloud-based projects for 14 years at the consultancy.

May 10, 2025

Roquette announces a new organization following the acquisition of IFF Pharma Solutions

Life sciences

The new organization features two Business Groups that will rely on dedicated teams and assets to fully focus on meeting customer and market needs. Isabelle Bouvier is appointed as CEO of the Health & Pharma Solutions Business Group and Pascal Leroy as CEO of the Nutrition & Bioindustry Business Group. Béatrice Totel replaces Isabelle Bouvier as CFO of Roquette.

How can we help you?

We're easy to reach