A financial filing published on Thursday has revealed that Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) will receive $700 million from Allergan plc (NYSE:AGN), marking the end of the dispute between the two.
The two firms have been engaged in a working capital dispute and according to the filing, Teva had requested adjustments adding up to $1.4 billion and $1.5 billion. The filing also revealed that the payment will feature a $465 million tax charge on Allergan in the fourth quarter. Once the working capital dispute is solved, the two biopharmaceuticals are expected to reveal the “actual or potential claims” as part of an agreement made in July 2015 as stated in the filing.
The settlement amount is expected to provide a much-needed boost to Allergan which has been having a rough time over the past few months. The Israeli company announced in December last year that it was planning to slash 14,000 jobs globally in an effort to save roughly $3 billion annually. The job cuts are expected to help save roughly $300 million to $400 million in operating costs. However, the announcement of the job cuts was not received well because Teva’s stock dropped significantly, thus wiping off a significant chunk of its market capitalization.
The announcement about the job cuts also led to massive demonstrations from the company’s workers. Meanwhile, Teva’s new CEO, Kåre Schultz believes that the new changes will help towards getting the firm back on the right path.
Allergan owns 68.7 million Teva shares which it got as part of the payment for selling Actavis Generics to Teva in 2016. Investors seem to have taken the announcement of the settlement as positive news because Teva’s shares went up by a significant margin. The same cannot be said for Allergan whose stock price declined by 2.3 percent during pre-market trading. Hopefully, the announcement of the settlement marks a positive turnaround that Teva can sustain this year considering the turbulence it experienced in 2017.
Teva stock closed the latest trading session on Thursday at $21.18 after a 3.77 percent gain compared to the value of the stock during the previous close.