Perrigo ends the tax assessment saga in Ireland, which has clouded trading in its stock in recent years. The company announced today that it will pay 297 million euros to the tax authorities in Ireland – while the original amount spent in 2018 was 1.6 billion euros. The company will not be required to pay fines or interest.
According to the announcement of Perrigo , She believes that her tax payments were correct and that she would eventually have been able to convince her of this as part of an appeal, but due to the risks and costs of conducting legal proceedings she preferred to reach an agreement now.
The tax assessment was related to the company Alan The Irish acquired by Perrigo. Its main asset was royalties from the sale of the drug Tisabi to MS, after Alan sold the rights to the drug toIn Eugene . In Ireland it was claimed that the tax that was supposed to be paid on the transaction is 33% and not 12.5% (the ordinary corporation tax in Ireland) because it is not part of the normal commercial activity but the sale of intellectual property.
The tax rate also affects the period after the acquisition of Alan, during which Perrigo received royalties from the sale of Tisabari, until the sale of the property in 2017 to Royalty Pharma (in a deal of up to $ 2.9 billion, as part of Perrigo’s desire to focus on its core business).
In any case, Perrigo will now pay 297 million euros, which will finally settle the issue. Of the amount, the cash portion will be 266 million euros and the balance will be deducted from payments already made.
Mori Kessler, CEO of Perrigo, said he believes the compromise is good for all stakeholders in the company and removes great uncertainty that has been a distraction for the company for 3 years. , “Kessler said.
At the same time – Perrigo receives 355 million euros in cash
Perigo also reports that as part of a mediation process in Belgium, it is expected to receive 355 million euros in cash (so that in fact the payment to the tax authorities in Ireland will be fully covered by the amount it will receive, and even leave a surplus). Perrigo acquired the Belgian Omega in 2014 for 3.8 billion euros, and later allegations arose about the accuracy of the information provided by the sellers in the acquisition process and a mediation process began. Sellers have an option to appeal the decision within three months, but Perrigo notes that in her estimation there is no basis for such an appeal.
The Perigo share is traded in New York and Tel Aviv, when it was listed for trading in Tel Aviv when it acquired the Israeli pharmaceutical company Agis in 2005. Perrigo recently announced the sale of its generic prescription drug business to an American investment firm for $ 1.55 billion. The implication of this transaction is that Perrigo will in fact cease to operate in Israel, because the sold activity is carried out in part in Israel. Another activity that Perrigo had in Israel, the Chemagis company, was previously sold for $ 130 million. Upon leaving operations in Israel, the question arises whether the company will choose to continue trading on the Tel Aviv Stock Exchange.
Prescription drug sales come in the wake of Perrigo’s current strategy to focus on self.care and less on healthcare, thus leveraging Perrigo’s experience in consumer areas and gaining higher multipliers, similar to consumer companies. In the field of self.care Perigo offers products in the fields of quality of life and disease prevention, as opposed to drugs for the treatment of specific diseases.
Perigo is currently traded at a value of $ 5.8 billion. The first report of the tax assessment from Ireland in December 2018 led to a sharp drop in the price of the Perrigo share, and at that time it lost about 29% of its value – about $ 2.1 billion, in one trading day. Since then, its stock has struggled to recover.
Even before that, it had weakened in relation to the highs it had reached in the past. Since the peak of April 2015 the stock has lost about 77% of its value; The climax came amid pharmaceutical company Mylan’s interest in taking over Perrigo.
The management of Perrigo at the time fought against the attempted hostile takeover, while at the same time the management of Mylan fought against Teva’s attempt to take over. In the end, both attempts were halted – Perrigo won the trust of investors who voted against Mylan’s offer, and Teva acquired Actavis and gave up its acquisition of Mylan. The three companies lost much of their value in the following years.
“Huge weight removed from stock”
Yaron Friedman, director of a stock desk at Bank Hapoalim’s research unit, said today that “a huge weight has been removed from the stock” and noted that the amount Perigo will pay is “relatively minor”, about one.fifth of the original tax assessment. Perigo’s management has argued throughout the period that it has strong arguments against the demand, estimating that the actual payment will be significantly lower than the original demand. “Friedman wrote. He also referred to the arbitration arrangement in Belgium, defining it as further positive news.
“Perrigo recently appears to be poised to make a breakthrough in the consumer goods market, on which it has put Yahweh in recent years. Shortly after completing the sale of generics last summer for € 1.55 billion, Perrigo announced last month the acquisition of HRA Pharma for € 1.8 billion. A basket of OTC products (over.the.counter drugs) in various areas in Europe, including brands in the fields of women’s health, and scar treatment and bladder care. It’s in the field of pharma (along with other fields), “Friedman wrote.
“Bottom line, we believe the last few months have been bright for Perrigo and its stock. Exiting the volatile generics business, strengthening OTC status and consumer goods, along with strengthening the balance sheet, are now also benefiting from the removal of the Irish tax cloud. , And further supports the ‘excess return’ recommendation for the company’s stock. “
Its target price for the Perigo share is $ 59, 35.6% higher than the price of the Perrigo share at the close of trading yesterday (Wednesday), before reporting a compromise in Ireland.