Mylan NV, which moved its corporate address overseas this year to lower its U.S. taxes, is now asking the American government for help fending off a hostile takeover.
So far, it’s not getting an answer.
The generic drugmaker relocated in February through a transaction known as an inversion, a maneuver that has drawn criticism in Washington for letting American companies cut their tax bills. Now incorporated in the Netherlands, Mylan is pushing U.S. antitrust officials to clarify whether Teva Pharmaceutical Industries Ltd. should have been allowed to buy a 4.61 percent stake in the company.
At issue is whether the Federal Trade Commission should consider Mylan a foreign or a U.S. issuer. Mylan argues it should pass the test of being treated like an American company under federal regulations because its principal offices are in Canonsburg, Pennsylvania. If Mylan were treated as an American issuer, the deal would need to have been cleared by U.S. antitrust officials.
“We know the inversion has invoked a lot of emotional and political banter but the reality is we remain a U.S. issuer under all of the formal and informal guidelines,” Mylan Chief Executive Officer Heather Bresch said in an interview with Bloomberg. “What we’ve said is you can’t be arbitrary and capricious.”
Mylan is trying to fend off a $40.1 billion takeover offer from its Israeli rival, which has amassed a stake in Mylan to step up its pursuit. With that investment, Teva will be able to bring a case against Mylan in a Dutch court and will be able to vote against Mylan’s bid for smaller competitor Perrigo Co.
Typically, when a U.S. company buys a stake in another company of more than $76.3 million, it must report the transaction to antitrust officials, who then review the purchase.
There is an exemption, however, for acquisitions by foreign companies of non-controlling positions in “foreign issuers,” according to Paul Denis, an antitrust lawyer at Dechert LLP in Washington. Foreign issuers are companies not incorporated in the U.S., not organized under U.S. laws, and not having their “principal office” within the U.S., he said. The term principal office isn’t defined in the regulations.
Mylan asked the FTC a second time this week to clarify whether the company is considered a foreign or domestic company by the agency’s standards. Bresch said she believes the FTC is treating Mylan as a foreign issuer -- letting Teva amass its stake without needing approval -- because of the politics around inversion deals like Mylan’s.
Right to Know
“If we are a U.S. issuer, it’s illegal for Teva to buy shares without HSR clearance,” Bresch said, in regard to Hart-Scott-Rodino Act, which regulates antitrust reviews of mergers. “If we’re a foreign issuer, what’s the basis of being a foreign issuer? We think the public deserves to know if the FTC has changed its long-standing policy.”
Justin Cole, a spokesman for the FTC, declined to comment.
“We are confident that our purchases were made in accordance with HSR requirements,” Teva said in a statement.
Mylan shares fell 1.3 percent to $71.62 at the close in New York. The stock has risen 27 percent this year on speculation that Teva will complete the deal.
In an interview last year, Bresch said part of Mylan’s rationale for its inversion deal was to help the company boost profits to make it less vulnerable to a takeover. At the time, she criticized what she called political rhetoric against such transactions.
“What’s patriotic is making this country a place that allows you to thrive, grow your industry versus handcuffing you and making you a sitting target” to be acquired by a company based elsewhere, she said then.