Allergan becomes largest shareholder in Teva

Teva picture: Bloomberg

Foreign investment in TASE hits five-year high

Allergan has a 9.9% stake after Teva paid partly in shares for its generics division.

With the completion of its acquisition of Allergan's Actavis generic division last week, Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) paid Allergan $33.4 billion in cash and a little more than 100 million Teva shares. Now comes Allergan's report to the US Securities and Exchange Commission (SEC) on its holdings in Teva.

Yesterday's report shows that Allergan own 9.9% of Teva's share capital, thereby becoming the largest shareholder in Teva. As of February 2016, the largest shareholder in Teva was Fidelity with 84 million shares, amounting to 9.2% of Teva's share capital.

Allergan's Teva stake is currently worth $5.3 billion. The number of shares given to Allergan was determined by a mechanism that calculated the average price of a Teva share around the time of the acquisition in July 2015; the value of the shares was initially $6.75 billion. Since then, however, Teva's share price has fallen from the peak it reached following the report of the acquisition.

As part of the agreement between Allergan and Teva, the companies agreed to sign a shareholders' agreement that will be canceled automatically if Allergan holds less than 1% of Teva's shares. The agreement limits Allergan's ability to sell the shares it receives for a one-year period, other than for exceptions agreed by the companies. Allergan can buy more Teva shares or sell the shares it possesses (subject to the terms of the agreement) on the open market, in private deals, or in any other way.

It was reported last year that the agreement between the companies barred Allergan from selling its shares to Teva competitors and activist investors for a specific period. The agreement also included a clause stating that as long as Allergan owns over 5% of Teva's shares, it is obligated to vote on specific matters at Teva shareholders' meetings in accordance with the recommendation of Teva's board. In its SEC report, Allergan notes that it is likely to discuss actions concerning Teva with the company's management and board, or with other shareholders, from time to time.

Allergan's market cap on the New York Stock Exchange is $98.2 billion. Pharmaceutical firm Pfizer previously planned to acquire Allergan for $160 billion, but the deal was called off several months ago. Had Allergan been sold, Pfizer would have become the largest shareholder in Teva.

Published by Globes [online], Israel business news - www.globes-online.com - on August 9, 2016