When Teva Pharmaceutical Industries Ltd.'s (NYSE: TEVA; TASE: TEVA) acquisition of Allergan's generic division is completed, Allergan will become the leading shareholder in Teva with a 10% stake, due to the share component of the deal ($6.75 billion out of the $40.5 billion total acquisition price). As part of the deal, Teva and Allergan agreed to sign a shareholders agreement, in which Allergan will be unable to sell its Teva shares to certain competitors of Teva and activist investors for a year. In this way, Teva has protected itself against a possible (albeit unlikely) hostile takeover attempt.
In addition, as long as Allergan owns 5% or more of Teva's shares, it is obligated to vote at shareholders meetings in accordance with the recommendations of Teva's board of directors, except in certain cases.
The agreement published yesterday in Allergan's report to the US Securities and Exchange Commission (SEC) includes $2.5 billion in compensation to be paid by Teva if the latter is unable to go ahead with the deal for lack of financing.
On the other hand, if Allergan calls the deal off in order to make a different one, it will pay the same amount of compensation to Teva. If the deal is cancelled for lack of approval from the antitrust authorities, Teva will pay Allergan $1 billion.
"Allergan was the preferred choice in the generic field"
In a recording published yesterday, Teva CEO Erez Vigodman said that Allergan had been Teva's preferred choice for an acquisition in the generic field, even before the attempted takeover of Mylan Pharmaceutical. When Teva contacted Allergan in 2014 and 2015, however, Allergan declined to sell its generic division. Teva also considered acquiring its competitor, Sandoz, controlled by Novartis.
"Mylan created an interesting trigger by deciding to go ahead with the Perrigo Company (NYSE:PRGO; TASE:PRGO) acquisition," Vigodman said. "We analyzed the Perrigo deal, and reached the conclusion that it was a bad one for Mylan's shareholders, and the company needed their approval. We realized that there was an opportunity here: we would offer Mylan's shareholders a better deal, and create an opening that would enable us to acquire Mylan - over the heads of its management and board of directors."
According to Vigodman, before the binding offer was submitted to Mylan, he called Allergan chairman Paul Bisaro again. "The Allergan chairman and CEO were speaking at some conference, and were asked about the possibility of selling their generic division. They said clearly that they had no intention of selling, but there was something in the answers they gave that gave us the feeling that perhaps there was something to talk about this time," Vigodman relates."
Published by Globes [online], Israel business news - www.globes-online.com - on July 29, 2015
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