Mylan Inc., Abbott Laboratories Tweak $5 Billion Tax Inversion Deal

October 23, 2014

By Riley McDermid, BioSpace.com Breaking News Staff

Biopharma giants Abbott Laboratories and Mylan Inc are likely still planning to merge despite the failure of a similar tax-friendly deal to go through between AbbVie and Shire Pharmaceuticals last week, the companies indicated this week.

Mylan announced slight changes to the terms of the deal on Wednesday, a sign analysts and industry sources are taking to mean that the $5.3 billion deal is still on the table and heading towards closure.

Mylan had been attempting to acquire Abbott in a bid to control part of its overseas generics business and reincorporate for tax purposes in the Netherlands. The new tweaks likely are meant to help protect any lucrative tax gains reaped from the so-called “inversion” merger in the face of new changes to tax rules announced by the U.S. Treasury Department last month.

"The (tax law) changes from Treasury are making people re-look at deal terms, and deals are not as favorable now," Edward Jones analyst Jeff Windau told Reuters. "That's what happened here, there had to be some tweaks."

Those new guidelines effectively scuttled the $55 billion deal between Abbvie and Irish-based Shire, said executives at AbbVie, who have blasted American regulators for interfering.

"The unprecedented unilateral action by the U.S. Department of Treasury may have destroyed the value in this transaction, but it does not resolve a critical issue facing American businesses today,” said Chief Executive Officer Richard Gonzalez on Monday.

“The U.S. tax code is outdated and is putting global U.S.-based companies at a disadvantage to foreign competitors in an area of critical importance, specifically investing in the United States,” he said in the statement. “Comprehensive tax reform is essential to create competitiveness and to stimulate investment in the economy."