Chapter 4

Case Study: Teva Pharmaceuticals Buys Barr Pharmaceuticals to Create a Global Generic Drugs Powerhouse

1. Why do you believe that Teva chose to acquire the outstanding stock of Barr rather than selected assets? Explain your answer.

Answer: Much of the value of Barr is intangible in the form of patents, brand names, and in-process research and development. The latter generally represents unpatented ideas and processes which have not been commercialized but may have the potential to become commercially viable products. When a firm acquires the stock of another firm, it is entitled to all assets (tangible or otherwise) and liabilities that are either on or off the balance sheet. Tax losses and credits and other value attributes such as brand names also pass to the owners of the stock. In a purchase of assets, the acquirer only is entitled to those assets that are listed and appended to the agreement of purchase and sale. Consequently, for a business where intangible assets are so important, a stock purchase would seem the most appropriate form of acquisition.

2. Mergers of businesses with operations in many countries must seek approval from a number of regulatory agencies. How might this affect the time between the signing of the agreement and the actual closing? How might the ability to realize synergy following the merger of the two businesses be affected by actions required by the regulatory authorities before granting their approval? Be specific.

Answer: Regulatory approvals for cross-border (i.e., multinational) transactions can be both expensive, time consuming, and nightmarish because of inconsistent regulations from one country to another. Some countries charge filing fees in the hundreds of dollars and others charge thousands. Antitrust regulators have historically tended to follow different standards, impose different fee structures