Pfizer to become Teva's largest shareholder


Pfizer will hold a 10% stake in the Israeli company, as part of its acquisition of Allergan.

Yesterday, less than four months after announcing the sale of its generic division to Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) in a $40.5 billion deal, US pharmaceutical company Allergan announced that it had been sold to Pfizer in a gigantic $160 billion deal. There is no direct connection between the two deals, but one of the conditions for Pfizer's acquisition, beyond approval by the regulatory authorities and the consent of the shareholders in Allergan and Pfizer, is completion of the sales of Allergan's generic division to Teva. According to yesterday's announcement, the timetable includes completion of the sale to Teva in the first quarter of 2016 and completion of the Pfizer deal in the second quarter of that year.

Pfizer will vote according to the Teva board's recommendations

If and when the sale of Allergan to Pfizer is completed, one of its results will be that Pfizer will become the largest shareholder in Teva (as of the end of 2014, the largest shareholder in Teva was Fidelity Management and Research (FMR) with a 5.6% stake). The reason is that Teva is paying for its acquisition of Allergan's generic division partly in shares. As part of that deal, Teva will give Allergan $6.75 billion in shares at a price to be determined by the weighted average of the Teva share during the 15 days preceding the acquisition announcement and the five days succeeding it - $67 per Teva share.

When the acquisition is completed, Allergan will become the biggest shareholder in Teva with a 10% stake, and since Allergan is being sold to Pfizer, the holding will belong to Pfizer.

Commercial and legal battles

As part of the deal, Pfizer, led by CEO Ian Read, will assume all the rights and obligations relating to the agreement with Teva, including an agreement barring the sale of the Teva shares to certain Teva competitors and to activist shareholders for one year. The agreement signed with Allergan, managed by CEO Brenton Saunders, is designed to protect Teva against a possible takeover. In addition, under the agreement as long as Allergan holds 5% or more of Teva's shares, it is obligated to vote at shareholders meetings in accordance with the recommendations of the Teva board of directors, except in certain cases.

Pfizer is one of the world's largest pharmaceutical companies, and the acquisition of Allergan will consolidate its status as the largest. Teva was the world's largest generic drug company even before its acquisition of Allergan's generic division. There have been reports and speculation in the past that Pfizer was seeking to take over Teva, including early this year, when Bloomberg reported that Pfizer had contacted Teva, only to receive an immediate refusal, without any concrete offer being made.

In its general business, Teva has launched generic versions of Pfizer's ethical drugs, among them Pfizer's most famous drug - Viagra, for treatment of impotence. Over the years, Teva and Pfizer have had many legal battles involving a significant proportion of the regular business in the pharmaceutical industry, with a generic company "attacking" the patent protecting ethical drugs, and being sued by the original manufacturer. One such legal proceeding ended in 2013 with a resounding defeat for Teva, which had to pay Pfizer $1.6 billion in compensation after launching a generic version of Pfizer's Protonix, after the court ruled that the patent for the drug was still valid.

Published by Globes [online], Israel business news - - on November 24, 2015

© Copyright of Globes Publisher Itonut (1983) Ltd. 2015

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