As companies pull back the reins on tax inversion deals in light of new U.S. rules, Mylan ($MYL) is charging full speed ahead with its $5.3 billion acquisition of Abbott Laboratories' ($ABT) overseas generics business. The drugmaker will shell out $32.5 million to 5 of its top executives ahead of schedule to help them avoid excise taxes meant to discourage companies from shifting their domiciles abroad.
Canonsburg, PA-based Mylan will also pay out $20.5 million to cover the excise taxes the top executives will actually owe. The company's board concluded that the 15% tax--levied under a 2004 law--would deprive its directors and executive officers of a "substantial portion" of their equity-based incentive pay. Because the execs were "critically important to Mylan's past success and in negotiating this transformative opportunity," Mylan said in an SEC filing, they shouldn't have to bear that penalty.
|Mylan CEO Heather Bresch|
Mylan's CEO Heather Bresch's accelerated equity is valued at $10.5 million and the tax bill is $5.3 million. Chairman Robert Coury stands to take home about $10.7 million in equity ahead of schedule and will receive more than $3 million to cover the excise tax, Mylan noted in its regulatory filing. If all goes to plan, Mylan's inversion deal with Abbott will move the company's tax rate from about 25% to the "high teens," the drugmaker said.
Mylan is not the only company handing top managers extra or accelerated pay related to a tax inversion. Last year, Actavis ($ACT) gave CEO Paul Bisaro more than $40 million of stock three years ahead of schedule to work around the excise tax that would stem from its Warner Chilcott purchase. The New Jersey-based drugmaker also promised Bisaro an additional $5 million if he stayed with the company through 2016, Bloomberg reported.
Meanwhile, other drugmakers are abandoning corporate inversion deals under the weight of new tax guidelines. In September, Illinois-based Hospira ($HSP) put the brakes on its proposed acquisition of France's Danone after Sen. Dick Durbin (D-IL) urged CEO F. Michael Ball not to shirk its responsibility to American taxpayers. In October, AbbVie ($ABBV) pulled the plug on its proposed $55 billion takeover of Dublin-based Shire ($SHPG), saying that the U.S. Treasure Department's sweeping changes "introduced an unacceptable level of uncertainty to the transaction" and eliminated certain financial benefits.
Special Report: Top 10 generics makers by 2012 revenue - Mylan