Mylan is acquiring Abbott Laboratories’ main branded generics business in an equity deal valued at $5.3 billion, a move that will also cut the former’s tax bill considerably.

Under the terms of the deal, Abbott will sell the business, which operates in Europe, Japan, Canada, Australia and New Zealand, for 105 million shares or 21% of the expanded company. However, it “does not expect to be a long-term shareholder in Mylan” and will be looking to redeploy the proceeds “to opportunities that would be accretive to earnings over time”.

Abbott is keeping hold of its emerging markets branded generics business in the merging markets where “the majority of healthcare products are paid for by the consumer”. It generated sales of $2.9 billion last year and is expected to enjoy upper-single to double-digit growth.

More than 100 products   

As for Mylan, which failed in its bid to buy Sweden’s Media earlier this year, it is getting hold of “an attractive portfolio of more than 100 specialty and branded generic pharmaceutical products in five major therapeutic areas” - cardio/metabolic, gastrointestinal, anti-infective/respiratory, CNS/pain and women's and men's health. It includes “several patent protected, novel and/or hard-to-manufacture products with continued growth potential”, the company added.

The assets are expected to bring in $1.9 billion in annual revenues and the business includes 2,000 sales reps in more than 40 non-U.S. markets, as well as “two high-quality manufacturing facilities”, in France and Japan. Abbott is keeping its plants in the Netherlands, Germany and Canada.

Mylan chairman Robert Coury said ”we have been actively looking at a wide range of opportunities, and the acquisition of this business is absolutely the right next strategic transaction”. He added that the Abbott deal “expands and further diversifies our business in our largest markets outside of the USA, and clearly positions Mylan for the next phase of growth through enhanced financial flexibility and a more competitive global tax structure”.

Tax rate down to high teens

The transaction is expected to lower Mylan's tax rate to 20-21% in the first full year, and to the high teens thereafter, “enhancing the company's competitiveness”. The US tax authorities may not be as enthusiastic as yet another healthcare company heads for Europe, in this case to the Netherlands.

As for Abbott, the deal further reduces its pharma presence, following the split last year that led to the creation of AbbVie, which itself is moving towards an acquisition of Shire.