Risk & Compliance

Teva Gets $100 Million ARS Settlement

It's just the latest payback by a company involved in the sale of the supposedly risk-free invesments.
Stephen TaubOctober 27, 2008

Teva Pharmaceutical Industries announced it has received $100 million as part of a settlement from an institution that acted as a broker in placing Teva’s auction rate securities investments.

The Jerusalem-based drug-making giant did not disclose the name of the institution. “Due to confidentially restrictions, additional information will not be disclosed,” it said in a brief announcement.

Teva added that it will record the payment as one-time finance income and will exclude it from its third quarter 2008 non-GAAP-adjusted results.

In other recent ARS settlement news, City National Securities, BNY Mellon Capital Markets, and Harris Investor Services last week agreed to repay a combined total of more than $60 million to ARS purchasers, according to The Financial Industry Regulatory Authority (FINRA).

Meanwhile, in July Teva announced a definitive agreement to acquire the properties of Barr Pharmaceuticals in a transaction that will be structured as a “forward triangular merger.”

A few potential snags could have thwarted the companies’ bid for tax-free treatment; namely clearing the continuity of interest hurdle and tax-status criteria known as the Helen of Troy tests (named after the first company that used the tests.) But the cross-border union of pharma companies has the right prescription to nab a healthy tax benefit. The companies are awaiting regulatory approval from the Federal Trade Commission.

Barr, which is based in Montvale, New Jersey, is slated to merge with and into a newly created domestic subsidiary of Teva. The deal calls for Barr stock to be converted into the right to receive 0.6272 ordinary shares of Teva (to be represented by American Depository Receipts) and $39.60 in cash. What’s more, the merger partners plainly expressed their intent that the deal meet the requirements for treatment as a tax-free reorganization within the meaning of the U.S. tax code.

Earlier this month, Barr’s board of directors approved the merger. A special meeting of shareholders to vote on the proposed acquisition is scheduled for November 21.