During remarks made in conjunction with release of the company's
interim financial results to June 30, 2014, Mylan Inc's CEO Heather Bresch confirmed
that it is to proceed with its "corporate inversion," to acquire some
of Abbott Laboratories' non-United States businesses and move its tax residence
to the Netherlands.
While it has been stressed that the transaction will further diversify Mylan's
business, strengthen the company in its largest markets outside of the US, and
provide new opportunities for growth, it has also been indicated that Mylan's
tax rate is also expected to be lowered "to around 20-21 percent in the
first full year, and to the high teens thereafter, enhancing the company's competitiveness."
Corporate inversions have been used by US companies when bidding for foreign
companies as a means of moving away from America's 35 percent corporate tax
rate. Under the present tax code, a company that merges with an offshore counterpart
can move its headquarters abroad, and take advantage of the lower corporate
tax rates in foreign jurisdictions, if at least 20 percent of its shares are
held by the foreign company's shareholders after the merger.
Legislative efforts in Congress have largely favored putting the minimum foreign
shareholding requirement up to 50 percent. Details of the Mylan-Abbott transaction
show that Mylan shareholders will end up owning approximately 79 percent of
"New Mylan," incorporated in the Netherlands, and Abbott will indirectly
only own approximately 21 percent.
However, with regard to the growing anti-inversion political discussions in
the US, and in particular, to the legislative proposals in Congress and White
House efforts to look at possible administrative actions that could reduce the
tax benefits of inversions, Bresch said that "there's tremendous speculation,
and really, at this point in time, that's all it is. And we are continuing to
move forward. We feel solid about our transaction."
She felt that "it would be challenging to change the US tax code to stop
inversion without punishing other foreign companies. Being punitive and not
allowing us to be competitive, I do not believe, is in our country's best interest,
and I hope that prevails at the end of the day. We're obviously continuing to
pay US taxes, as well as a lot of these foreign companies are paying US taxes
and creating US jobs."
Bresch concluded that, "as much as the Senate may want to vote on something,
… I just continue to think the odds of anything getting done, and looking
at one little snapshot of our tax code which needs significantly reforming,