Mylan Inc.’s share price up, to acquire Abbott Laboratories in an all-stock $5.3 billion deal

Mylan Inc. announced in a statement that it is to acquire the generic-drug Abbott Laboratories in a “spinversion” all-stock deal estimated at $5.3 billion, which will allow both companies to be domiciled outside the US, lowering tax rates.

According to the terms of the purchase that were disclosed, 21% of the new company will be held by Abbott Laboratories. The new organisation is planned to be based in the Netherlands, and the tax rate is said to be in the higher teens a few years from now, down from the 21% in the US.

“We were the last Mohican standing. We’re the last in our sector to have announced an inversion or to be domiciled outside the U.S,” Heather Bresch, CEO of Mylan said, cited by Bloomberg. This step “gives us a very competitive landscape to pursue other opportunities.”

When the transaction is finalized, Mylan will be provided with access to more than 100 generic drugs in developed markets outside its home market.

The move comes at a moment when drug manufacturers are seeking to expand their portfolios and rearrange their assets. According to Mergermarket, excluding the transaction between Mylan Inc. and Abbott Laboratories, the mergers and acquisitions (M&A) in the pharmaceuticals, medical and biotechnology sector amounted to more than 260 billion dollars so far in 2014, accounting for 16% of all M&A activities.

One of the analysts, who work at Sanford Bernstein – Mr. Ronny Gal wrote in an investor note, which was cited by the Wall Street Journal: “Mylan got both the tax rate it needed and commercial infrastructure in the European Union. Mylan will need to integrate quickly, stabilize the products it acquired and negotiate additional deals with sellers who understand the level of profit their assets could generate for Mylan.”

Mylan Inc. was 2.07% up to close at 51.24 dollars per share yesterday, marking a one-year change of +59.68%. According to information published on CNN Money, the 15 analysts offering 12-month price forecasts for Mylan Inc. have a median target of 61.00, with a high estimate of 70.00 and a low estimate of 41.00. The median estimate represents a +19.05% increase from the last price of 51.24.