The $5.3B Mylan-Abbott inversion deal won't go the way of AbbVie-Shire
- On Wednesday, U.S.-based Mylan Inc and Abbott Laboratories announced that they would go through with with their planned tax-inversion deal—unlike Abbott spinoff AbbVie's ill-fated effort to merge with Ireland-based Shire—but with some changes.
- Abbott will sell part of its overseas generic portfolio—including for drugs that it sells in Europe, Japan, Canada, Australia, and New Zealand—to Mylan, which will then reincorporate in the Netherlands with a lower tax base as New Mylan.
- The companies announced that they were tweaking certain terms of the deal; for instance, Mylan secured better manufacturing pricing at Abbott labs that will prepare its products, and Abbott will receive 5 million more shares than originally intended in the newly-formed company. Investors aren't precisely sure why the changes were made, although the smart money is on newly-announced U.S. Treasury Department rules that make it harder for companies to go through with inversions.
Under the new terms of the deal, Mylan shareholders will own 78% of New Mylan while Abbott will own 22%. That split was originally 79-21.
The tweak likely has to do with new Obama administration regulations that make it more difficult for companies to artificially inflate or deflate the value of companies involved in inversion mergers. U.S. investors cannot own 80% or more of a company that wants to shift its tax base overseas under the new rules, and the issuance 110 million shares to Abbott is likely meant to ensure that the new company doesn't run afoul of that ratio.
The deal is expected to close in Q1 2015.