One more potential Teva-related challenge for Mylan's shareholders: A huge tax bill
- If Teva ends up acquiring Mylan before the end of February 2016, as it has pledged to do, Mylan's shareholders would have to pay hefty short-term capital gain taxes.
- Mylan faced a similar situation last year when it paid $5.3 billion for Abbott's generic drugs portfolio, and effectively shifted the headquarters for the new company to the Netherlands. Investors faced capital gains taxes because of that inversion merger.
- While shareholders could face taxation at both the corporate shareholder level and the personal level, Mylan is helping its top executives cover the cost of taxes with hefty pay-outs.
There is a major imbroglio going on between Teva, Mylan,and Perrigo, as the M&A frenzy in the generics drug industry starts to hit a crescendo. While the implications of the ins and outs have been weighed in many ways, the issue of taxes is an especially tense conversation.
At the upper end, if the Teva deal goes through before the end of Feburary 2016, short-term capital gain tax rates could top out at 43.4%. In addition, individual shareholders would face personal long-term gain taxes of 23.8%. However, at the top of the heap, Mylan's CEO, Heather Bresch, has been protected thus far from the brunt of the taxation onus. For example, last year, she received tax reimbursement of $5.3 million to cover the taxes triggered by the Abbot deal, while Chairman Robert Coury received more than $3 million to cover excise taxes.
Nonetheless, it may be a non-issue based on the way things are going right now. Mylan has flat out refused Teva's $40 billion-plus offer and have vowed to fight long and hard against any hostile takeover efforts.