The battered share price of Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) could be about to take a further hammering. Last year on August 2 2016, Teva completed the acquisition of Actavis, the generic division of Allergan for about $40 billion. on completion of the deal Allergan received $33.43 billion cash and another 100,300,000 shares in Teva, a 9.9% stake in the company, making it the biggest shareholder in the Israeli pharmaceutical company. The shares were locked down for a year with Allegan unable to sell them until August 2 2017 - tomorrow.
Allergan has yet to provide any answer on whether it will sell or hang onto the stock. And if it does sell will all the shares be sold in one fell swoop or gradually over time? Clearly if Allergan does choose to sell, it will pile even more pressure on Teva's embattled management.
Allergan has kept its value
Over the past year, Teva's share price is down 40%, while Allegan's share price, after falling for a while has recovered to the same level as last August. So while Teva has a market cap of just $33 billion, less than it paid for Actavis, Allergan has a market cap of $85 billion.
These figures show that last August 2 Allergan held Teva shares worth $5.3 billion, which are today worth just $3.2 billion - a loss "on paper" of more than $2 billion.
Allergan's management has reiterated on a number of occasions that it does not see its stake in Teva as a strategic asset. However, selling the shares now might be seen by the market as a lack of confidence in Teva, its plans and its future.
On Thursday, Allergan will publish its second quarter results for 2017 and will hold the customary conference call with investors and analysts. This may be an opportunity for management to announce its plans regarding its Teva stake.
Teva will also report its second quarter results on Thursday although the Israeli company's management is presumably completely in the dark about Allergan's plans.
Teva's share price has fallen 55% since it announced its plans to buy Actavis 2 years ago. Shortly afterwards Teva acquired Mexican company Rimsa in a failed deal that is now dragging through the US courts. These two deals led to the departure of CEO Erez Vigodman in February after a loss of confidence in the capital markets.
Published by Globes [online], Israel business news - www.globes-online.com - on August 1, 2017
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