July 15, 2014 | By Varun Saxena
Wall Street analysts took advantage of a July 14 conference call concerning Abbott’s ($ABT) just-announced sale of its developed market generics business to ask about some of their favorite topics, future M&A and the recent onset of tax inversion mania among life science companies.
In fact, the all-stock $5.3 billion divestiture to Mylan ($MYL) had an inversion element itself. Following the deal’s closure, the Pennsylvania generic and specialty pharma company will organize itself in Netherlands under the name Mylan N.V. and see its effective tax rate fall from 35% to around 20%. But Abbott CEO Miles D. White told Wall Street he does not feel pressure to join in the inversion party himself, and would only do so if the transaction made sense from other strategic perspectives as well.
He believes that a lot of people misunderstand the purpose of inversion, saying, “It’s constantly characterized as reducing taxes et cetera. I would only point out that when a company inverts, it still pays the same taxes in the United States as it paid before, it still pays the same taxes internationally that it paid before–there’s no change to the taxes. The single biggest change is that a company or its shareholders have access to cash overseas upon which they’ve already paid taxes that they can then distribute to their shareholders, which by the way it will be taxed again when it gets distributed as dividends.”