Moody’s says Perrigo acquisition adds to Irish tax concerns


Rating firm Moody’s turned negative on the creditworthiness of over-the-counter drug group Perrigo, saying a $ 2.1 billion (€ 1.78 billion) acquisition closed this week adds to concerns caused by a potentially significant Irish tax settlement.

The Irish-based but US-led group said on Wednesday it had signed a binding offer to purchase HRA Pharma, a specialist in wound care and women’s health products, from private equity group Astorg. and Goldman Sachs Asset Management for $ 2.1 billion in cash.

The deal comes as Perrigo continues to work to settle the biggest tax dispute between the Irish Revenue Commissioners and a company. Perrigo said in July that Revenue had accepted the disputed amount at stake to be € 970 million, against an initial claim of € 1.64 billion.

Moody’s, which rates Perrigo’s debt at Ba1, one level below what is considered investment grade, said the group’s appetite for transactions is “aggressive.”

He shifted his outlook from stable to negative, saying the HRA deal, along with an Irish tax settlement, will leave the group’s debt “well above” four times earnings before interest, taxes, depreciation. and amortization (ebitda) over the next years period.

The Irish tax litigation arises from Elan’s 2013 sale of its intellectual property interests in multiple sclerosis drug Tysabri to Biogen for an upfront payment of $ 3.25 billion and a share of future royalties. This sale took place months before Perrigo bought what was left of Elan.

Capital transaction

Revenue decided, following a 2016 audit, to characterize the sale of Tysabri by Elan as a capital transaction, subject to a 33% capital gains tax. Perrigo maintains that the money received was correctly reported as business income, taxable at 12.5 percent.

Based on its view, Revenue said € 1.64 billion was owed. However, following extensive information exchange between the two sides, the company said in July that Revenue accepts the original figure to be overestimated.

Moody’s said Perrigo may have to resort to a $ 1 billion credit facility, which is due to expire in 2023, to settle with Revenue, as its $ 1.8 billion cash balances are expected to be largely depleted by the deal. HRA.

While Perrigo is due to receive $ 412 million in court arbitration over losses resulting from its acquisition of Omega Pharma in 2015, the timing of payment is “uncertain,” Moody’s said.

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