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Allergan to pay $700M to Teva to settle dispute on generics unit deal

Allergan plc will pay $700 million to Teva Pharmaceutical Industries Ltd. to settle a working capital dispute relating to Teva's acquisition of Allergan's generics unit for $40.5 billion in 2016.

In October 2016, Teva provided Allergan with its proposed estimated adjustment to the closing date working capital balance. But the company did not agree with Teva's proposed adjustment, and the proposed adjustments were submitted to arbitration to determine the working capital amount in accordance with GAAP.

Teva initially proposed an adjustment of about $1.4 billion and later submitted a revised adjustment of about $1.5 billion to the arbitrator.

On Oct. 30, 2017, Teva submitted a notice of direct and third-party claims seeking indemnification for virtually all of the same items for which Teva sought a proposed adjustment in the arbitration as well as several new items as to which no quantity of damages was asserted.

Allergan stated that Teva was not entitled to a "double recovery" for the same damages in the arbitration and under an indemnification theory and is subject to further limitations on recovery as set forth in the agreement under which the global generics business was sold.

Under the settlement, Israel-based Teva and Allergan will dismiss their working capital dispute arbitration and will release actual or potential claims relating to the deal.

Dublin-based Allergan will take a one-time pretax charge to discontinued operations of about $465 million in the fourth quarter ending Dec. 31, 2017, in connection with the settlement.