"Shortly after the acquisition, Teva Pharmaceutical Industries Ltd. (NYSE: TEVA; TASE: TEVA) concluded that it had substantially overpaid for the Rimsa Companies. It is now desperately seeking what is in effect a retroactive discount," a lawsuit filed in New York against a Teva subsidiary by the party that sold Mexican company Rimsa to Teva less than a year ago for $2.3 billion alleges.
The claimants allege that Teva is trying to lower the price for the deal after the fact, among other things saying that the sellers cheated it, an assertion that the sellers completely deny.
"The fact is that Teva completely misunderstood what it was purchasing and wants to undo the transaction by any desperate measure, including making false accusations of fraud. It did not understand the Rimsa Companies or the Mexican market. It has terminated virtually the entire management team. It unilaterally ceased manufacturing most of the Rimsa Companies’ products. It has destroyed the Rimsa Companies and now wants its money back because otherwise Teva knows its management will be held accountable by its shareholders and other constituents for their negligence and incompetence," the claims states.
Teva announced its acquisition of Rimsa in October 2015, shortly after the announcement of its acquisition of Actavis from Allergan for $40.5 billion. Teva CEO Erez Vigodman said at the time that the deal would abet Teva's strategy of increasing its presence in key emerging markets, and gave Teva an important platform.
Teva competed with other companies for the acquisition of Rimsa, and analysts already asserted at the time that the deal was expensive. For example, UBS called the deal one of the most expensive it had seen in the sector, but added that it was a logical deal that would expand Teva's business in Mexico, an important market for the company.
Teva said in response, "The company is committed to assigning top priority to all the patients it serves around the world. Recently, after closing the acquisition of Mexican pharmaceutical company Rimsa, Teva discovered violations committed by the sellers, particularly by Fernando Espinosa Abdala and Leopoldo de Jesus Espinosa Abdala from Rimsa.
"We have taken steps, and are continuing to do so, in close cooperation with Rimsa employees and the regulatory authorities in Mexico in order to investigate and deal with these matters, while giving priority to the patients' needs. Teva intends to respond with force to this lawsuit, and we will request a range of remedies for breach of contract and deceit. Teva believes that the facts will speak for themselves, and it will be seen that the sellers of Rimsa misled Teva, the regulators, and the public by taking active measures to conceal the breaches they committed."
Published by Globes [online], Israel business news - www.globes-online.com - on September 14, 2016
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