The Mylan Laboratories Inc. headquarters in Canonsburg, Pennsylvania. (Jason Cohn/Getty)
Mylan Inc. on Monday said it has agreed to buy Abbott Laboratories’ specialty generic drug business in developed markets outside the U.S. in a $5.3 billion all-stock deal that would allow Mylan to relocate some of its operations to the Netherlands.
The deal calls for Abbott to carve out the assets of its specialty and generic drug business in Europe, Japan, Canada, Australia and New Zealand and transfer them to a new Netherlands-based public company, which will merge with Mylan to create Mylan N.V. In exchange, Abbott will take a 21 percent stake in the combined company, which will be headed by Mylan’s current leadership. Mylan plans to keep its headquarters in Pittsburgh.
Mylan sought legal counsel from Cravath, Swaine & Moore while Abbott turned to Baker & McKenzie.
Chicago-based Abbott, which sells its products in over 150 countries, said the transaction would provide it with flexibility in its long-term goal of focusing on emerging markets. The generic pharmaceutical business that will remain with Abbott earned $2.9 billion in sales last year, and the company expects its growth rate to be in the upper single to double digits.
Mylan, meanwhile, will gain control of an Abbott business that earned $2 billion in revenue last year, with manufacturing and sales in over 100 specialty and generic pharmaceutical products in 40 markets across Europe, Japan, Canada, Australia and New Zealand.
Mylan touted the geographical advantages of the deal, noting that it would enhance the company’s product offerings outside of the U.S. The company, which currently sells its products in approximately 140 countries, expects that the deal will double its annual revenues in Europe, Japan and Canada while providing it with a meaningful presence in Central and Eastern Europe.
The company also pointed to a “more competitive global tax structure,” an apparent reference to its plans to relocate to the Netherlands. This would allow Mylan to enjoy a lower corporate tax rate and be able to repatriate foreign cash without incurring tax penalties. Also, Mylan would no longer be subject to U.S. taxes on foreign sales after reincorporation, a maneuver known as a corporate inversion.
Mylan’s decision to leave for the Netherlands comes just months after a previous inversion attempt fell through. In April the company sought to purchase Swedish pharmaceutical company Meda in an attempt to move to Sweden, but the deal failed when Meda’s board rejected two offers, including a sweetened one valued at $9 billion.
Mylan is not the only U.S. pharmaceutical company with ambitions to ditch the borders, as the recent uptick in inversions shows. Pfizer Inc.’s failed $119 billion bid for AstraZeneca in May and Medtronic’s successful $42.9 billion purchase of Covidien in June are among the latest attempts by other companies to do the same.
AbbVie, which was Abbott’s research branch until its $54.4 billion spinoff in 2013, is currently in talks with Irish pharmaceutical company Shire PLC in a bid to move to the U.K. After rebuffing three bid offers, Shire said on Monday that it was willing to give a positive recommendation to its shareholders for AbbVie’s latest $53 billion bid, received on Sunday.
In its bid for Abbott’s specialty and generic business, Mylan sought legal counsel from Cravath. The deal team was led by New York-based corporate partners Scott Barshay, Thomas Dunn and Mark Greene, and also included antitrust partner Christine Varney, environmental partner Matthew Morreale, executive compensation and benefits partner Eric Hilfers, finance partners William Fogg, Andrew Pitts and George Zobitz, intellectual property partner David Kappos and practice area attorney Anthony Magistrale, litigation partner David Stuart, real estate senior attorney John Gerhard and tax partners Stephen Gordon and J. Leonard Teti II. Associates Gregory Beaton, Christopher Couvelier, Margaret Segall D’Amico, Michelle Garrett, Kyle Gazis, Aaron Gruber, Evgeniya Hochenberg, Jonathan Katz, Kara Mungovan, Katerina Novak and Stephen Severo also worked on the deal.
Cravath has represented Mylan in a variety of patent litigation on the company’s pharmaceutical products. In addition, Cravath advised Mylan on its $6.7 billion purchase of the generics unit of German chemical company Merck in 2007—a deal that transformed Mylan into one of the world’s top generic producers. It also represented the company in its $550 million acquisition of Bioniche Pharma Holdings in 2010 and its acquisition of Synerx Pharma in 2011.
For its part, Abbott turned to Baker & McKenzie, with corporate and securities practice partner Olivia Tyrrell, M&A partner Craig A. Roeder and associates Andrew Warmus, Matthew Gaudette and Meghanne Downes working on the deal.
Baker & McKenzie has a long history of representing Abbott, reportedly extending back over six decades. In 2010 the firm served as lead counsel in Abbott’s $3.7 billion acquisition of the generic drug unit of Indian company Piramal Healthcare, as well as its $7.1 billion acquisition of Brussells-based Solvay in 2009.