424B5 1 d207243d424b5.htm 424B5 424B5
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Filed Pursuant to Rule 424(b)(5)
Registration Nos. 333-201984,
333-201984-09

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of

Securities to be Registered

   Amount to be
Registered
    Amount of
Registration Fee
 

Teva Pharmaceutical Finance Netherlands III B.V. 1.400% Senior Notes due 2018

     $1,500,000,000        $151,050 (1) 

Teva Pharmaceutical Industries Limited Guarantee of Teva Pharmaceutical Finance Netherlands III B.V. 1.400% Senior Notes due 2018

     (2)        (2)   

Teva Pharmaceutical Finance Netherlands III B.V. 1.700% Senior Notes due 2019

     $2,000,000,000        $201,400 (1) 

Teva Pharmaceutical Industries Limited Guarantee of Teva Pharmaceutical Finance Netherlands III B.V. 1.700% Senior Notes due 2019

     (2)        (2)   

Teva Pharmaceutical Finance Netherlands III B.V. 2.200% Senior Notes due 2021

     $3,000,000,000        $302,100 (1) 

Teva Pharmaceutical Industries Limited Guarantee of Teva Pharmaceutical Finance Netherlands III B.V. 2.200% Senior Notes due 2021

     (2)        (2)   

Teva Pharmaceutical Finance Netherlands III B.V. 2.800% Senior Notes due 2023

     $3,000,000,000        $302,100 (1) 

Teva Pharmaceutical Industries Limited Guarantee of Teva Pharmaceutical Finance Netherlands III B.V. 2.800% Senior Notes due 2023

     (2)        (2)   

Teva Pharmaceutical Finance Netherlands III B.V. 3.150% Senior Notes due 2026

     $3,500,000,000        $352,450 (1) 

Teva Pharmaceutical Industries Limited Guarantee of Teva Pharmaceutical Finance Netherlands III B.V. 3.150% Senior Notes due 2026

     (2)        (2)   

Teva Pharmaceutical Finance Netherlands III B.V. 4.100% Senior Notes due 2046

     $2,000,000,000        $201,400 (1) 

Teva Pharmaceutical Industries Limited Guarantee of Teva Pharmaceutical Finance Netherlands III B.V. 4.100% Senior Notes due 2046

     (2)        (2)   

Total

     $15,000,000,000        $1,510,500   

 

(1)  Calculated in accordance with Rule 457(r) under the Securities Act of 1933, as amended. A filing fee of $1,510,500 has been transmitted to the SEC in connection with the securities offered from the registration statement (File Nos. 333-201984 and 333-201984-09) by means of this prospectus supplement.

 

(2)  No separate consideration will be received for the guarantees. Pursuant to Rule 457(n) under the Securities Act, no separate fee is payable with respect to the guarantees being registered.


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PROSPECTUS SUPPLEMENT

(To Prospectus dated July 13, 2016)

$15,000,000,000

 

LOGO  

Teva Pharmaceutical Finance Netherlands III B.V.

  LOGO

$1,500,000,000 1.400% Senior Notes due 2018

$2,000,000,000 1.700% Senior Notes due 2019

$3,000,000,000 2.200% Senior Notes due 2021

$3,000,000,000 2.800% Senior Notes due 2023

$3,500,000,000 3.150% Senior Notes due 2026

$2,000,000,000 4.100% Senior Notes due 2046

Payment of principal and interest unconditionally guaranteed by

Teva Pharmaceutical Industries Limited

 

 

Teva Pharmaceutical Finance Netherlands III B.V. (“Teva Finance”) is offering

 

    $1,500,000,000 of its 1.400% Senior Notes due 2018 (the “2018 notes”);

 

    $2,000,000,000 of its 1.700% Senior Notes due 2019 (the “2019 notes”);

 

    $3,000,000,000 of its 2.200% Senior Notes due 2021 (the “2021 notes”);

 

    $3,000,000,000 of its 2.800% Senior Notes due 2023 (the “2023 notes”);

 

    $3,500,000,000 of its 3.150% Senior Notes due 2026 (the “2026 notes”); and

 

    $2,000,000,000 of its 4.100% Senior Notes due 2046 (the “2046 notes” and, collectively with the 2018 notes, the 2019 notes, the 2021 notes, the 2023 notes and the 2026 notes, the “notes”).

The 2018 notes will mature on July 20, 2018, the 2019 notes will mature on July 19, 2019, the 2021 notes will mature on July 21, 2021, the 2023 notes will mature on July 21, 2023, the 2026 notes will mature on October 1, 2026 and the 2046 notes will mature on October 1, 2046. Interest on the 2018 notes will be payable semi-annually in arrears on January 20 and July 20 of each year, beginning January 20, 2017, to the holders of record at the close of business on the preceding January 5 and July 5, respectively (whether or not a business day). Interest on the 2019 notes will be payable semi-annually in arrears on January 19 and July 19 of each year, beginning January 19, 2017, to the holders of record at the close of business on the preceding January 4 and July 4, respectively (whether or not a business day). Interest on the 2021 notes and the 2023 notes will be payable semi-annually in arrears on January 21 and July 21 of each year, beginning January 21, 2017, to the holders of record at the close of business on the preceding January 6 and July 6, respectively (whether or not a business day). Interest on the 2026 notes and the 2046 notes will be payable semi-annually in arrears on April 1 and October 1 of each year, beginning April 1, 2017, to the holders of record at the close of business on the preceding March 15 and September 15, respectively (whether or not a business day). Payment of all principal and interest payable on the notes is unconditionally guaranteed by Teva Pharmaceutical Industries Limited (“Teva”).

Teva Finance may redeem its notes, in whole or in part, at any time or from time to time, on at least 20 days’, but not more than 60 days’, prior notice. The notes will be redeemable at a redemption price equal to the greater of (1) 100% of the principal amount of the notes to be redeemed and (2) the sum of the present values of the Remaining Scheduled Payments (as defined below) discounted on a semi-annual basis, at a rate equal to the sum of the Treasury Rate plus 12.5 basis points, in the case of the 2018 notes, 15 basis points, in the case of the 2019 notes, 20 basis points, in the case of the 2021 notes, 25 basis points, in the case of the 2023 notes, 25 basis points, in the case of the 2026 notes, or 30 basis points, in the case of the 2046 notes, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. If the closing of the acquisition of Actavis Generics (as defined below) does not occur on or prior to October 26, 2016, or if the Master Purchase Agreement (as defined below) is terminated at any time prior thereto, the notes will be subject to a special mandatory redemption (the “special mandatory redemption”) at a redemption price equal to 101% of their aggregate principal amount, plus accrued and unpaid interest, if any, from the date of initial issuance of the notes up to, but not including, the special redemption date. See “Description of the Notes and the Guarantees—Special Mandatory Redemption.”

The notes will be unsecured senior obligations of Teva Finance, which is an indirect subsidiary of Teva, and the guarantees will be unsecured senior obligations of Teva. Teva estimates that it will receive net proceeds of approximately $14.9 billion from this offering after deducting the underwriting discounts and estimated offering expenses payable by Teva. Teva intends to use such net proceeds, together with the net proceeds of its anticipated Euro and Swiss Franc (“CHF”) denominated senior note offerings, cash on hand, borrowings under its new term loan facility and additional borrowings under its short-term credit facilities, to finance its acquisition of Allergan plc’s worldwide generic pharmaceuticals business and certain other assets, to pay related fees and expenses, and/or otherwise for general corporate purposes. See “Use of Proceeds.”

 

 

Investing in the notes involves risks. See “Risk Factors” beginning on page S-12 of this prospectus supplement and page 5 of the accompanying prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus supplement or the accompanying prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

    Per
2018
Note
    Total     Per
2019
Note
    Total     Per
2021
Note
    Total     Per
2023
Note
    Total     Per
2026
Note
    Total     Per
2046
Note
    Total  

Offering price

    99.914   $ 1,498,710,000        99.991   $ 1,999,820,000        99.835   $ 2,995,050,000        99.666   $ 2,989,980,000        99.734   $ 3,490,690,000        99.167   $ 1,983,340,000   

Underwriting discount

    0.225   $ 3,375,000        0.250   $ 5,000,000        0.350   $ 10,500,000        0.400   $ 12,000,000        0.450   $ 15,750,000        0.875   $ 17,500,000   

Proceeds to issuer (before expenses)

    99.689   $ 1,495,335,000        99.741   $ 1,994,820,000        99.485   $ 2,984,550,000        99.266   $ 2,977,980,000        99.284   $ 3,474,940,000        98.292   $ 1,965,840,000   

The underwriters expect to deliver the notes to investors through the book-entry facilities of The Depository Trust Company (“DTC”) and its direct participants, including Euroclear Bank S.A./N.V. (“Euroclear”), as operator of the Euroclear System, and Clearstream Banking, société anonyme (“Clearstream”), on or about July 21, 2016.

 

 

Joint Book-Running Managers

 

Barclays   BofA Merrill Lynch     BNP PARIBAS     Credit Suisse   HSBC  

Mizuho Securities

Citigroup   Morgan Stanley   RBC Capital Markets   SMBC Nikko

Co-Managers

 

Bank of China   BBVA   COMMERZBANK  

Lloyds Securities

MUFG   PNC Capital Markets LLC   Scotiabank   TD Securities

The date of this prospectus supplement is July 18, 2016.


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We have not, and the underwriters have not, authorized anyone to provide any information or to make any representations other than those contained or incorporated by reference in this prospectus supplement, the accompanying prospectus or in any free writing prospectuses we have prepared. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus supplement and the accompanying prospectus is an offer to sell only the notes offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus supplement and the accompanying prospectus is current only as of the respective dates of such documents.

This prospectus supplement and the accompanying prospectus are only being distributed to and are only directed at (i) persons who are outside the United Kingdom or (ii) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”), (iii) high net worth entities, and other persons to whom they may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order or (iv) persons to whom an invitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection with the issue or sale of any notes may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as “relevant persons”). The notes are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire the notes will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this prospectus supplement or the accompanying prospectus.

This prospectus supplement and the accompanying prospectus have been prepared on the basis that any offer of notes in any Member State of the European Economic Area (each, a “Relevant Member State”) will be made pursuant to an exemption under the Prospectus Directive, as implemented in that Relevant Member State, from the requirement to publish a prospectus for offers of notes. Accordingly, any person making or intending to make an offer in that Relevant Member State of notes which are the subject of the offering contemplated in this prospectus supplement may only do so in circumstances in which no obligation arises for Teva Finance or any of the managers to publish a prospectus pursuant to Article 3 of the Prospectus Directive, in each case, in relation to such offer. Neither Teva Finance nor the underwriters have authorized, nor do they authorize, the making of any offer of notes in circumstances in which an obligation arises for Teva Finance or the underwriters to publish a prospectus for such offer. The expression Prospectus Directive means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression 2010 PD Amending Directive means Directive 2010/73/EU.

In connection with the issue of the notes, the joint book-running managers (or persons acting on behalf of any of the joint book-running managers) may over-allot notes or effect transactions with a view to supporting the market price of the notes at a level higher than that which might otherwise prevail. However, there is no assurance that the joint book-running managers (or persons acting on behalf of a joint book-running manager) will undertake stabilization action. Any stabilization action may begin on or after the date on which adequate public disclosure of the terms of the offer of the notes is made and, such stabilizing, if commenced, may be discontinued at any time but must be ended no later than the earlier of 30 days after the issue date of the notes and 60 days after the date of allotment of the notes. Any stabilization action or over-allotment must be conducted by the relevant joint book-running managers (or persons acting on behalf of any joint book-running manager) in accordance with all applicable laws and rules.

 

 

 

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TABLE OF CONTENTS

Prospectus Supplement

 

     Page  

Summary

     S-1   

Risk Factors

     S-12   

Forward-Looking Statements

     S-20   

Capitalization

     S-22   

Use of Proceeds

     S-24   

Sources and Uses

     S-24   

Unaudited Pro Forma Condensed Combined Financial Statements

     S-26   

Description of the Notes and the Guarantees

     S-45   

United States Federal Income Tax Considerations

     S-59   

Dutch Tax Considerations

     S-62   

Israeli Tax Considerations

     S-65   

Underwriting (Conflicts of Interest)

     S-66   

Experts

     S-72   

Legal Matters

     S-72   

Where You Can Find More Information

     S-72   

Incorporation of Certain Documents by Reference

     S-73   

Prospectus

 

About This Prospectus

     1   

Teva Pharmaceutical Industries Limited

     2   

Finance Subsidiaries

     3   

Risk Factors

     5   

Forward-Looking Statements

     5   

Ratio of Earnings to Fixed Charges

     6   

Price Range of ADSs and Ordinary Shares

     6   

Use of Proceeds

     8   

Description of Ordinary Shares

     8   

Description of Mandatory Convertible Preferred Shares

     11   

Description of American Depositary Shares

     12   

Description of Debt Securities and Guarantees

     19   

Description of Purchase Contracts

     28   

Description of Units

     28   

Description of Warrants

     29   

Taxation

     29   

Plan of Distribution

     30   

Experts

     32   

Legal Matters

     32   

Where You Can Find More Information

     32   

Enforcement of Civil Liabilities

     34   

 

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SUMMARY

This summary highlights information contained elsewhere or incorporated by reference in this prospectus supplement and the accompanying prospectus. This is not intended to be a complete description of the matters covered in this prospectus supplement and the accompanying prospectus and is subject to, and qualified in its entirety by reference to, the more detailed information and financial statements (including the notes thereto) included or incorporated by reference in this prospectus supplement and the accompanying prospectus. Unless otherwise indicated, all references to the “Company,” “we,” “us,” “our” or “Teva” refer to Teva Pharmaceutical Industries Limited and its subsidiaries. All references to “Teva Finance” or the “issuer” refer to Teva Pharmaceutical Finance Netherlands III B.V., an indirect subsidiary of Teva. All references to the “accompanying prospectus” are to the prospectus dated July 13, 2016.

The Company

We are a global pharmaceutical company, committed to increasing access to high-quality healthcare by developing, producing and marketing affordable generic medicines and a focused portfolio of specialty medicines. We operate in pharmaceutical markets worldwide, with a significant presence in the United States, Europe and other markets. As a world-leading pharmaceutical company, we are strategically positioned to benefit from ongoing changes in the global healthcare environment.

We seek to address unmet patient needs while capitalizing on evolving market, economic and legislative dynamics in global healthcare. These dynamics include the aging population, increased spending on pharmaceuticals in emerging markets, economic pressure on governments and private payors to provide accessible healthcare solutions, legislative and regulatory reforms, an increase in patient awareness and the growing importance of over-the-counter (“OTC”) medicines.

We believe that our dedicated leadership and employees, world-leading generics expertise and portfolio, focused specialty portfolio, global reach, robust research and development (“R&D”) capabilities and global infrastructure and scale position us to take advantage of opportunities created by these dynamics.

Segments

We operate our business in two segments:

 

    Generic medicines, which include chemical and therapeutic equivalents of originator medicines in a variety of dosage forms, including tablets, capsules, injectables, inhalants, liquids, ointments and creams. We are the leading generic drug company in the United States and Europe, and we have a significant or growing presence in our Rest of the World markets. We are also one of the world’s leading manufacturers of active pharmaceutical ingredients.

 

    Specialty medicines, which include several franchises, most significantly our core therapeutic areas of central nervous system medicines such as Copaxone®, Azilect® and Nuvigil® and of respiratory medicines such as ProAir® HFA and QVAR®. Our specialty medicines segment includes other therapeutic areas, such as oncology medicines, including Treanda®, women’s health and selected other areas.

In addition to these two segments, we have other activities, primarily PGT Healthcare (“PGT”), our OTC joint venture with The Procter & Gamble Company (“P&G”).

Actavis Generics Acquisition

On July 26, 2015, we entered into a definitive agreement (the “Master Purchase Agreement”) with Allergan plc (“Allergan”) to acquire its worldwide generic pharmaceuticals business and certain other assets (“Actavis Generics”). Following an amendment to the Master Purchase Agreement, dated July 11, 2016, we will pay total

 



 

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consideration of $33.5 billion in cash and approximately 100 million of Teva’s ordinary shares, to be issued to Allergan at the closing of the transaction. Closing of the transaction is subject to certain conditions, including relevant regulatory approvals. Other than the closing conditions that can only be satisfied on the closing date, we believe that the only unsatisfied closing condition is the approval of the U.S. Federal Trade Commission (“FTC”). We expect that closing will occur shortly, based upon our current estimate of the timing to obtain clearance from the FTC. We previously received regulatory approval from the European Commission for the acquisition, subject to certain divestitures. In connection with the closing of the Actavis Generics acquisition, due to regulatory requirements, Teva expects to divest products with aggregate revenues in 2015 of approximately $1.1 billion.

Following consummation of the acquisition, our generic medicines segment is expected to make up a much larger percentage of our revenues. Further information about the Actavis Generics acquisition, including a copy of the Master Purchase Agreement, as amended, is contained in our Reports of Foreign Private Issuer on Form 6-K filed by us with the U.S. Securities and Exchange Commission (the “SEC”) on July 28, 2015 and July 13, 2016.

We expect to finance the $33.5 billion cash consideration for the Actavis Generics acquisition, together with related fees and expenses, with the net proceeds of this offering, together with the net proceeds of our anticipated Euro senior notes offering and CHF senior notes offering (each as defined below), which we expect to commence shortly after this offering, cash on hand (including the proceeds of our offerings of American Depositary Shares (“ADSs”) and mandatory convertible preferred shares in December 2015), borrowings under our new term loan facility and additional borrowings under our short-term credit facilities. Depending on the timing of the closing of the Actavis Generics acquisition, we may need to borrow additional funds under our bridge facility, which we expect to repay with the proceeds of this offering and the other contemplated offerings.

Actavis Generics

Actavis Generics includes, with certain exceptions, Allergan’s U.S. and international generic commercial units, third-party supplier Medis, global generic manufacturing operations, global generic R&D unit, international OTC commercial unit (excluding OTC eye care products) and some mature international brands. Actavis Generics has operations in more than 60 countries, with the United States representing more than half of the revenues of the business in 2015 and for the three months ended March 31, 2016. Its other major markets include the United Kingdom (which Teva is divesting), Russia and Poland. As of March 31, 2016, Actavis Generics marketed over 300 generic pharmaceutical product families in the U.S.

Actavis Generics’ growth strategy has focused on (i) internal development of differentiated and high-demand products, including challenging patents associated with these products, (ii) establishment of strategic alliances and collaborations and (iii) acquisitions of complementary products and companies. Actavis Generics also develops and out-licenses generic pharmaceutical products through its Medis third party business.

Actavis Generics sells generic pharmaceutical products primarily to drug wholesalers, retailers and distributors, including national retail drug and food store chains, hospitals, clinics, mail order retailers, government agencies and managed healthcare providers such as health maintenance organizations and other institutions.

Actavis Generics has devoted significant resources to R&D. It conducts its R&D activities through a network of global R&D centers, the majority of which are being acquired by Teva. As a result of these activities, Actavis Generics had a pipeline of more than 220 Abbreviated New Drug Applications (“ANDAs”) on file in the United States as of March 31, 2016.

The special purpose combined financial statements and other information relating to Actavis Generics are included in a Report of Foreign Private Issuer on Form 6-K filed by us with the SEC on July 13, 2016. See also the pro forma financial information included herein under “Unaudited Pro Forma Condensed Combined Financial Statements.”

 



 

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Strategic Rationale

The acquisition will combine two generics businesses with complementary strengths, brands and cultures, creating a leading product portfolio and pipeline. The resulting product portfolio will be complemented by a significantly expanded and more efficient global footprint, including strengthened operations, sales and R&D platforms in attractive markets around the world. Teva will seek to leverage this expanded generics pipeline, R&D capabilities, operational network, supply chain, global commercial deployment and infrastructure to achieve greater efficiencies across the healthcare system and provide patients and consumers worldwide with better access to high quality affordable medicines.

In acquiring Actavis Generics, Teva seeks to create a dynamic generics and specialty pharmaceutical company that integrates and leverages our combined expertise to develop innovative products. Teva will continue to seek to develop high-value medicines, with an emphasis on complex and branded generics, focused on the needs of patients and the people who care for them. In particular, Teva believes that the acquisition will:

 

    Provide Substantial Financial Benefits. The transaction is expected to provide substantial financial benefits for Teva, including more highly diversified revenues and profits, and substantial cost synergies and tax savings. Actavis Generics had net revenues and total direct expenses of $6,184.4 million and $5,367.4 million, respectively, in the year ended December 31, 2015, and $1,289.6 million and $1,201.3 million, respectively, in the three months ended March 31, 2016. In addition, Teva expects to achieve substantial cost synergies and tax savings due to increased efficiencies in operations, G&A, manufacturing, and sales and marketing.

 

    Create Leading Generics Portfolio and Pipeline. Following the acquisition (giving effect to required divestitures), Teva will have an enhanced portfolio of generic products and an attractive pipeline of approximately 326 pending ANDAs in the United States, including approximately 123 exclusive U.S. “first-to-file” pending ANDAs (including shared exclusivities).

 

    Enhance R&D Capabilities and Technology. Following the acquisition, Teva will have what it believes will be among the most advanced R&D capabilities in the generics industry. These capabilities will enhance Teva’s ability to develop and offer a portfolio of complex and differentiated generic products.

 

    Bolster Specialty Development Pipeline. Teva further expects to leverage these enhanced R&D capabilities with its expertise in its core specialty therapeutic areas to develop novel products based on known molecules, thereby expanding its specialty product portfolio.

 

    Expand Global Commercial Reach. Through the acquisition, Teva will have a commercial presence across 100 markets, including a leading position in over 40 markets, positioning Teva to significantly enhance the global scale and efficiency of its sales and R&D platforms.

We caution you that we may not realize the anticipated benefits of the acquisition. See “Risk Factors—Risks Related to the Actavis Generics Acquisition.” Additionally, Actavis Generics’ business is subject to risks similar to those described in the risk factors that are incorporated herein by reference, and the combined business will continue to be subject to risks including ongoing consolidation of the pharmaceutical industry customer base.

Financing Transactions

In connection with the Actavis Generics acquisition, the following transactions (collectively, the “Financing Transactions”) have occurred or are expected to occur:

 

    we issued 59,400,000 ADSs and 3,712,500 mandatory convertible preferred shares in December 2015 (including ADSs and shares issued pursuant to the underwriters’ exercise of over-allotment options in January 2016);

 



 

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    in addition to the $15 billion aggregate principal amount of the notes in this offering, finance subsidiaries of Teva plan to issue senior notes denominated in Euro (the “Euro senior notes offering”) and senior notes denominated in Swiss francs (the “CHF senior notes offering”), which are expected to comprise an aggregate principal amount of approximately $5 billion;

 

    we plan to borrow approximately $5 billion under the new term loan facility that we entered into in November 2015; and

 

    we plan to borrow approximately $2.8 billion under our short-term credit facilities (our bridge facility and/or revolving line of credit).

The foregoing description of the Financing Transactions is included herein solely for informational purposes. The Euro senior notes offering and the CHF senior notes offering will each be made by means of a separate, standalone offering memorandum, and not by means of this prospectus supplement. The amount and terms and conditions of the Euro senior notes offering and the CHF senior notes offering are subject to market conditions. There can be no assurance that we will be able to complete the Euro senior notes offering or the CHF senior notes offering on terms and conditions acceptable to us or at all. This offering is not contingent on the completion of the Euro senior notes offering or the CHF senior notes offering.

 

 

Teva

Teva was incorporated in Israel on February 13, 1944, and is the successor to a number of Israeli corporations, the oldest of which was established in 1901. Our executive offices are located at 5 Basel Street, P.O. Box 3190, Petach Tikva 4951033, Israel, and our telephone number is +972-3-926-7267.

Teva Finance

Teva Finance is a Dutch private limited liability company that was formed on September 21, 2015. Its address is Piet Heinkade 107, 1019 GM Amsterdam, Netherlands, telephone number +31 (0)20-2193000.

 



 

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The Offering

 

Issuer

Teva Pharmaceutical Finance Netherlands III B.V. (“Teva Finance”), which is an indirect, wholly owned subsidiary of Teva Pharmaceutical Industries Limited (“Teva”) and has no assets or operations other than in connection with this offering.

 

Securities Offered

  $1,500,000,000 aggregate principal amount of the 1.400% Senior Notes due 2018 (the “2018 notes”);

 

    $2,000,000,000 aggregate principal amount of the 1.700% Senior Notes due 2019 (the “2019 notes”);

 

    $3,000,000,000 aggregate principal amount of the 2.200% Senior Notes due 2021 (the “2021 notes”);

 

    $3,000,000,000 aggregate principal amount of the 2.800% Senior Notes due 2023 (the “2023 notes”);

 

    $3,500,000,000 aggregate principal amount of the 3.150% Senior Notes due 2026 (the “2026 notes”); and

 

    $2,000,000,000 aggregate principal amount of the 4.100% Senior Notes due 2046 (the “2046 notes” and, collectively with the 2018 notes, the 2019 notes, the 2021 notes, the 2023 notes and the 2026 notes, the “notes”).

 

Guarantees

Teva will irrevocably and unconditionally guarantee the punctual payment when due of the principal and interest, whether at maturity, upon redemption, by acceleration or otherwise (including any additional amounts in respect of taxes as described in “Description of the Notes and the Guarantees—Additional Tax Amounts”), if any, on the notes of each series.

 

Ranking

As indebtedness of Teva, the guarantees will rank:

 

    senior to the rights of creditors under any debt expressly subordinated to the guarantees;

 

    equally with other unsecured debt of Teva from time to time outstanding other than any that is subordinated to the guarantees;

 

    effectively junior to Teva’s secured indebtedness up to the value of the collateral securing that indebtedness; and

 

    effectively junior to the indebtedness and other liabilities of Teva’s subsidiaries.

 

Maturity Dates

  The 2018 notes will mature on July 20, 2018;

 

    The 2019 notes will mature on July 19, 2019;

 

    The 2021 notes will mature on July 21, 2021;

 

    The 2023 notes will mature on July 21, 2023;

 

    The 2026 notes will mature on October 1, 2026; and

 



 

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    The 2046 notes will mature on October 1, 2046.

 

Interest Payment Dates

  January 20 and July 20 of each year, beginning January 20, 2017, and at maturity, with respect to the 2018 notes;

 

    January 19 and July 19 of each year, beginning January 19, 2017, and at maturity, with respect to the 2019 notes;

 

    January 21 and July 21 of each year, beginning January 21, 2017, and at maturity, with respect to the 2021 notes and the 2023 notes; and

 

    April 1 and October 1 of each year, beginning April 1, 2017, and at maturity, with respect to the 2026 and the 2046 notes.

 

Interest Rates

  1.400% per year in the case of the 2018 notes;

 

    1.700% per year in the case of the 2019 notes;

 

    2.200% per year in the case of the 2021 notes;

 

    2.800% per year in the case of the 2023 notes;

 

    3.150% per year in the case of the 2026 notes; and

 

    4.100% per year in the case of the 2046 notes.

 

Optional Redemption

Teva Finance may redeem the notes of any series, in whole or in part, at any time or from time to time, on at least 20 days’, but not more than 60 days’, prior notice. The notes of each series will be redeemable at a redemption price equal to the greater of (1) 100% of the principal amount of the notes to be redeemed and (2) the sum of the present values of the Remaining Scheduled Payments (as defined under “Description of the Notes and the Guarantees—Optional Redemption by the Issuer”) discounted, on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months), at a rate equal to the sum of the Treasury Rate (as defined in “Description of the Notes and the Guarantees—Optional Redemption by the Issuer”) plus 12.5 basis points, in the case of the 2018 notes, 15 basis points, in the case of the 2019 notes, 20 basis points, in the case of the 2021 notes, 25 basis points, in the case of the 2023 notes, 25 basis points, in the case of the 2026 notes, or 30 basis points, in the case of the 2046 notes, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

 

Special Mandatory Redemption

If the closing of the Actavis Generics acquisition does not occur on or prior to October 26, 2016, or if the Master Purchase Agreement is terminated at any time prior thereto, the notes will be subject to a special mandatory redemption at a redemption price equal to 101% of their aggregate principal amount, plus accrued and unpaid interest, if any, from the date of initial issuance of the notes up to, but not including, the special redemption date. See “Description of the Notes and the Guarantees—Special Mandatory Redemption.”

 



 

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Use of Proceeds

Teva estimates that it will receive net proceeds of approximately $14.9 billion from this offering after deducting the underwriting discounts and estimated offering expenses payable by Teva.

 

  Teva intends to use such net proceeds, together with the net proceeds of its anticipated Euro senior notes offering and CHF senior notes offering, cash on hand (including the proceeds of our offerings of ADSs and mandatory convertible preferred shares in December 2015), borrowings under its new term loan facility and additional borrowings under its short-term credit facilities, to finance its acquisition of Actavis Generics, to pay related fees and expenses and/or otherwise for general corporate purposes. Depending on the timing of the closing of the Actavis Generics acquisition, we may need to borrow additional funds under our bridge facility, which we expect to repay with the proceeds of this offering and the other contemplated offerings. See “Use of Proceeds.”

 

  As described above, if the closing of the Actavis Generics acquisition does not occur on or prior October 26, 2016, or if the Master Purchase Agreement is terminated at any time prior thereto, the notes will be subject to a special mandatory redemption at a redemption price equal to 101% of their aggregate principal amount, plus accrued and unpaid interest, if any, from the date of initial issuance of the notes up to, but not including, the special redemption date (as defined under “Description of the Notes and the Guarantees—Special Mandatory Redemption”). See “Description of the Notes and the Guarantees—Special Mandatory Redemption.”

 

Form, Denomination and Registration

    The notes of each series will be issued only in fully registered form without coupons and in minimum denominations of $2,000 principal amount and whole multiples of $1,000 in excess of $2,000. Each series of notes will be evidenced by one or more global registered notes deposited with the trustee of the notes, as custodian for DTC. Beneficial interests in the global registered notes will be shown on, and transfers will be effected through, records maintained by DTC and its direct and indirect participants.

 

Absence of a Public Market for the Notes

The notes are new securities for which no market currently exists. One or more of the underwriters have advised us that they intend to make markets in the notes as permitted by applicable laws and regulations. The underwriters are not obligated, however, to make markets in the notes, and they may discontinue this market making at any time in their sole discretion. We cannot assure you that any active or liquid market will develop in the notes.

 

Listing

The notes will not be listed on any securities exchange or included in any automated quotation system.

 

Trustee and Paying Agent

The Bank of New York Mellon

 



 

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Conflicts of Interest

As described in “Use of Proceeds,” depending on the timing of the closing of the Actavis Generics acquisition, Teva may need to borrow additional funds under its bridge facility, which it expects to repay with the proceeds of this offering and the other contemplated offerings. Affiliates of each of the underwriters are lenders under the new term loan facility, the revolving line of credit and the bridge facility and, in the event that the net proceeds of this offering are used to repay the borrowings under the bridge facility, the underwriters and their affiliates that are lenders under that facility will receive 5% or more of the proceeds from this offering. Because of the manner in which the net proceeds from this offering may be used, this offering will be conducted in accordance with FINRA Rule 5121. Under FINRA Rule 5121, the appointment of a “qualified independent underwriter” is not necessary in connection with this offering. See “Underwriting (Conflicts of Interest)—Conflicts of Interest.”

 

Risk Factors

Before you invest in the notes, you should carefully consider the risks involved. Accordingly, you should carefully consider the information contained in or incorporated by reference into this prospectus supplement and the accompanying prospectus, including the discussions under “Risk Factors” beginning on page S-12.

 



 

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Summary Selected Historical and Pro Forma Financial Data of Teva

The following summary selected operating data of Teva for each of the years in the three-year period ended December 31, 2015 and summary selected balance sheet data at December 31, 2015 and 2014 are derived from Teva’s audited consolidated financial statements and related notes incorporated by reference into this prospectus supplement, which have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. The summary selected operating data for each of the years in the two-year period ended December 31, 2012 and summary selected balance sheet data at December 31, 2013, 2012 and 2011 are derived from other audited consolidated financial statements of Teva, which have been prepared in accordance with U.S. GAAP.

The summary selected unaudited financial information of Teva as of March 31, 2016 and for each of the three-month periods ended March 31, 2016 and 2015 are derived from unaudited consolidated financial statements incorporated by reference into this prospectus supplement. Such financial statements include, in Teva’s opinion, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the results for the unaudited periods. You should not rely on these interim results as being indicative of results Teva may expect for the full year or any other interim period.

The unaudited pro forma financial information of Teva is based upon the historical financial statements of Teva and the special purpose combined statements of net assets acquired and revenues and direct expenses of Actavis Generics for the year ended December 31, 2015 and for the three-month period ended March 31, 2016, which are incorporated by reference herein, adjusted to give effect to the Actavis Generics acquisition and related financing, as described under “Unaudited Pro Forma Condensed Combined Financial Statements” included in this prospectus supplement.

The information set forth below is only a summary and is not necessarily indicative of the results of future operations of Teva, and you should read the summary selected historical financial data together with Teva’s audited and unaudited consolidated financial statements and related notes and “Operating and Financial Review and Prospects” included in Teva’s Annual Report on Form 20-F for the year ended December 31, 2015 and Reports of Foreign Private Issuer on Form 6-K incorporated into this prospectus supplement by reference. See the section entitled “Where You Can Find More Information” for information on where you can obtain copies of these documents.

 



 

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Operating Data

 

    For the three months
ended March 31,
    For the year ended December 31,  
    Pro
forma
2016
    2016     2015     Pro
forma
2015
    2015     2014     2013     2012     2011  
    (unaudited)     (unaudited)                                
    U.S. dollars in millions (except per share and share amounts)  

Net revenues

    5,803        4,810        4,982        24,708        19,652        20,272        20,314        20,317        18,312   

Cost of sales

    3,029        2,019        2,146        12,560        8,296        9,216        9,607        9,665        8,797   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

    2,774        2,791        2,836        12,148        11,356        11,056        10,707        10,652        9,515   

Research and development expenses

    501        389        332        1,946        1,525        1,488        1,427        1,356        1,095   

Selling and marketing expenses

    946        839        922        3,985        3,478        3,861        4,080        3,879        3,478   

General and administrative expenses

    442        304        307        1,787        1,239        1,217        1,239        1,238        932   

Legal settlements, loss contingencies, impairments, restructuring and
others

    85        94        526        1,843        1,762        539        2,312        1,974        901   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

    800        1,165        749        2,587        3,352        3,951        1,649        2,205        3,109   

Financial expenses—net

    416        298        192        1,389        1,000        313        399        386        153   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

    384        867        557        1,198        2,352        3,638        1,250        1,819        2,956   

Income taxes

    84        228        104        294        634        591        (43     (137     127   

Share in losses of associated companies—net

    6        6        9        121        121        5        40        46        61   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

    294        633        444        783        1,597        3,042        1,253        1,910        2,768   

Net income (loss) attributable to non-controlling interests

    (3     (3     (2     9        9        (13     (16     (53     9   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Teva

    297        636        446        774        1,588        3,055        1,269        1,963        2,759   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Accrued dividends on preferred shares

    66        66        —          15        15        —          —          —          —     

Net income attributable to ordinary shareholders

    231        570        446        759        1,573        3,055        1,269        1,963        2,759   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share attributable to ordinary shareholders:

                 

—Basic ($)

    0.23        0.62        0.52        0.79        1.84        3.58        1.49        2.25        3.10   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

—Diluted ($)

    0.23        0.62        0.52        0.79        1.82        3.56        1.49        2.25        3.09   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average number of shares
(in millions):

                 

—Basic

    1,013        913        851        955        855        853        849        872        890   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

—Diluted

    1,020        920        859        964        864        858        850        873        893   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 



 

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Balance Sheet Data

 

    As of March 31,     As of December 31,  
    Pro
forma
2016
    2016     2015     2014     2013     2012     2011  
    (unaudited)        
    U.S. dollars in millions  

Financial assets (cash, cash equivalents and marketable securities)

    1,258        7,222        8,404        2,601        1,245        3,089        1,748   

Working capital (operating assets minus liabilities)

    5,056        (294     32        1,642        2,493        3,589        3,937   

Total assets

    97,945        55,126        54,233        46,420        47,508        50,609        50,142   

Short-term debt and current maturities of long term liabilities

    24,463        1,581        1,585        1,761        1,804        3,006        4,280   

Long-term debt, net of current maturities

    13,369        8,619        8,358        8,566        10,387        11,712        10,236   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total debt

    37,832        10,200        9,943        10,327        12,191        14,718        14,516   

Total equity

    35,831        30,591        29,927        23,355        22,636        22,867        22,343   

Ratio of Earnings to Fixed Charges

Our ratio of earnings to fixed charges in accordance with U.S. GAAP for each of the periods presented below was as follows:

 

     Three months
ended
March 31,
2016
     Year ended December 31,  
        2015          2014          2013          2012          2011    

Ratio of earnings to fixed charges

     14.4         9.3         11.8         4.7         5.7         12.5   

 



 

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RISK FACTORS

Before you invest in the notes, you should carefully consider the risks involved. Accordingly, you should carefully consider the information contained in or incorporated by reference into this prospectus supplement and the accompanying prospectus, including the risk factors listed below and in the accompanying prospectus. See also “Forward-Looking Statements.”

Risks Related to Our Business

Investment in our securities involves various risks. In making an investment decision, you should carefully consider the risks and uncertainties described under the heading “Risk Factors” in our Annual Report on Form 20-F for the year ended December 31, 2015, our Reports of Foreign Private Issuer on Form 6-K that are incorporated herein by reference and any future filings made by Teva pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), prior to the termination of this offering as well as the risk factors below.

Risks Related to the Actavis Generics Acquisition

If the Actavis Generics acquisition is consummated, generics will be a significantly larger component of our business.

For the year ended December 31, 2015, our generics segment represented approximately 49% of our revenues. Following the completion of the Actavis Generics acquisition, the percentage of our revenues and profits attributable to sales of generics is expected to increase substantially. Generic pharmaceuticals are, as a general matter, less profitable than specialty pharmaceuticals, and due to the size of the acquisition, it is unlikely that the proportion of revenues attributable to generic pharmaceuticals, which will move from less than half before the acquisition to nearly two-thirds afterward, will change significantly over the next few years. Accordingly, we will be more dependent on our generics business and increasingly subject to market and regulatory factors affecting generic pharmaceuticals worldwide.

Teva may fail to realize all of the anticipated benefits of the Actavis Generics acquisition or those benefits may take longer to realize than expected. Teva may also encounter significant difficulties in integrating Actavis Generics.

The ability of Teva to realize the anticipated benefits of the Actavis Generics acquisition will depend, to a large extent, on Teva’s ability to integrate the Actavis Generics business. The combination of two independent businesses is a complex, costly and time-consuming process. The nature of a carve out acquisition makes it inherently more difficult to assume operations on closing day as well as to integrate activities, as certain systems, processes and people may not all transfer with the acquired business to support such activities. As a result, Teva will be required to devote significant management attention and resources to integrate the business practices and operations of Teva and Actavis Generics. The integration process may disrupt the businesses and, if implemented ineffectively, would restrict the realization of the full expected benefits. The failure to meet the challenges involved in integrating the two businesses and to realize the anticipated benefits of the transaction could cause an interruption of, or a loss of momentum in, the activities of the combined businesses and could adversely affect the results of operations of the combined businesses.

In addition, the overall integration of the businesses may result in material unanticipated problems, expenses, liabilities, competitive responses, loss of customers and other business relationships, and diversion of management’s attention. The difficulties of combining the operations of the companies include, among others:

 

    the diversion of management’s attention to integration matters;

 

    difficulties in achieving anticipated cost savings, synergies, business opportunities and growth prospects from the combination;

 

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    difficulties in the integration of operations and systems;

 

    conforming standards, controls, procedures and accounting and other policies, business cultures and compensation structures between the two companies;

 

    difficulties in the assimilation of employees;

 

    difficulties in managing the expanded operations of a significantly larger and more complex company;

 

    challenges in keeping existing customers and obtaining new customers;

 

    challenges in attracting and retaining key personnel; and

 

    coordinating a geographically dispersed organization.

Many of these factors will be outside of our control and any one of them could result in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy, which could materially impact the business, financial condition and results of operations of the combined company. In addition, even if the Actavis Generics operations are integrated successfully, the full benefits of the transaction and other pending acquisitions may not be realized, including the synergies, cost savings or sales or growth opportunities that are expected. These benefits may not be achieved within the anticipated time frame, or at all. Further, additional unanticipated costs may be incurred in the integration of the businesses of Teva and Actavis Generics. All of these factors could cause dilution to the earnings per share of Teva, decrease or delay the expected accretive effect of the transaction, and negatively impact the price of our debt and other securities. As a result, it cannot be assured that the Actavis Generics acquisition will result in the realization of the full benefits anticipated from such transaction.

As a result of this offering and other contemplated financings in connection with the Actavis Generics acquisition, Teva will have a substantially higher level of indebtedness, which will increase its expenses and could adversely affect its business, including by restricting its ability to engage in additional transactions or incur additional indebtedness or resulting in a downgrade or other adverse action with respect to Teva’s credit rating.

In connection with the Actavis Generics acquisition, Teva expects that it will borrow approximately $28 billion through various debt financings, including the notes offered hereby. Accordingly, following the completion of the acquisition, giving effect to the incurrence of debt, the consolidated debt of Teva is expected to be approximately $38 billion. As a result, Teva’s borrowing costs will increase significantly.

This substantial level of debt could have important consequences to Teva’s business, including, but not limited to:

 

    reducing the benefits Teva expects to receive from the Actavis Generics acquisition;

 

    making it more difficult for Teva to satisfy its obligations;

 

    limiting Teva’s ability to borrow additional funds and increasing the cost of any such borrowing;

 

    increasing Teva’s vulnerability to, and reducing its flexibility to respond to, general adverse economic and industry conditions;

 

    limiting Teva’s flexibility in planning for, or reacting to, changes in its business and the industry in which it operates;

 

    placing Teva at a competitive disadvantage as compared to its competitors, to the extent that they are not as highly leveraged; and

 

    restricting Teva from pursuing certain business opportunities.

 

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Teva expects its credit ratings to be downgraded as a result of the Actavis Generics acquisition.

Teva’s credit ratings impact the cost and availability of future borrowings and, accordingly, Teva’s cost of capital. Teva’s ratings at any time will reflect each rating organization’s then opinion of Teva’s financial strength, operating performance and ability to meet its debt obligations. Following the announcement of the Actavis Generics acquisition, Standard and Poor’s Financial Services LLC (“S&P”) and Moody’s Investor Service, Inc. (“Moody’s”) downgraded Teva’s ratings to BBB and Baa1, respectively. Moody’s is expected to further downgrade Teva’s ratings in connection with the consummation of the Actavis Generics acquisition to Baa2 (as it already has with respect to the notes). Any reduction in Teva’s credit ratings may limit Teva’s ability to borrow at interest rates consistent with the interest rates that have been available to Teva prior to the Actavis Generics acquisition. If Teva’s credit ratings are downgraded or put on watch for a potential downgrade, Teva may not be able to sell additional debt securities or borrow money in the amounts, at the times or interest rates or upon the more favorable terms and conditions that might be available if Teva’s current credit ratings are maintained.

Teva expects that, for a period of time following the consummation of the Actavis Generics acquisition, Teva will have significantly less cash on hand than prior to the closing. This reduced amount of cash could adversely affect Teva’s ability to grow.

Teva is expected to have, for a period of time following the consummation of the Actavis Generics acquisition, significantly less cash and cash equivalents on hand than the approximately $6.0 billion of cash and cash equivalents that Teva had as of March 31, 2016. Although the management of Teva believes that it will have access to cash sufficient to meet Teva’s business objectives and capital needs, the lessened availability of cash and cash equivalents for a period of time following the consummation of the Actavis Generics acquisition could constrain Teva’s ability to grow its business. Teva’s more leveraged financial position following the Actavis Generics acquisition could also make it vulnerable to general economic downturns and industry conditions, and place it at a competitive disadvantage relative to its competitors that have more cash at their disposal. In the event that Teva does not have adequate capital to maintain or develop its business, additional capital may not be available to Teva on a timely basis, on favorable terms, or at all.

The Master Purchase Agreement may be terminated in accordance with its terms and the Actavis Generics acquisition may not be completed.

The Master Purchase Agreement contains a number of conditions that must be fulfilled to complete the acquisition. Those conditions primarily consist of U.S. antitrust approval and European Union (“EU”) antitrust approval (which has been obtained) and other customary conditions, including, among others, (i) the accuracy of representations and warranties and compliance with covenants and (ii) the absence of any material adverse effect with respect to Actavis Generics or Teva. The Master Purchase Agreement contains certain customary termination rights, including, among others, the right of either party to terminate the Master Purchase Agreement if the closing has not occurred by October 26, 2016.

While we intend to use the proceeds of this offering to fund the Actavis Generics acquisition, this offering is not contingent on the completion of the Actavis Generics acquisition. Until the closing of the Actavis Generics acquisition or the special mandatory redemption described below, holders of the notes will be exposed to the risks faced by the Company’s existing business without any of the potential benefits from the Actavis Generics acquisition. In addition, if the Master Purchase Agreement is terminated in specified circumstances, certain termination fees become payable.

If the closing of the Actavis Generics acquisition does not occur on or prior to October 26, 2016, or if the Master Purchase Agreement is terminated at any time prior thereto, the notes will be subject to a special mandatory redemption at a redemption price equal to 101% of their aggregate principal amount, plus accrued and unpaid interest, if any, from the date of initial issuance of the notes up to, but not including, the special redemption date, as defined under “Description of the Notes and the Guarantees—Special Mandatory

 

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Redemption.” See “— Risks Related to the Notes—If the closing of the Actavis Generics acquisition does not occur on or prior to October 26, 2016, or if the Master Purchase Agreement is terminated at any time prior thereto, you may not obtain your expected return on the notes.”

Teva and Allergan must obtain U.S. antitrust approval to consummate the Actavis Generics acquisition, which if delayed or not granted or granted with unacceptable conditions, may prevent, delay or jeopardize the consummation of the transaction, result in additional expenditures of money and resources and/or reduce the anticipated benefits of the transaction.

Consummation of the Actavis Generics acquisition requires approval by the FTC, which has broad discretion in administering the governing regulations. Teva can provide no assurance that the required U.S. antitrust approval will be obtained. Moreover, as a condition to its approval of the transaction, the FTC has required various divestitures and may impose additional requirements, limitations or costs, further divestitures and/or place restrictions on the conduct of the business of the combined company after the closing of the acquisition. Any one of these requirements, limitations, costs, divestitures or restrictions may delay the effective time of the acquisition and may reduce the anticipated benefits of the transaction. In addition, if the Master Purchase Agreement is terminated under certain circumstances by Allergan or Teva due to failure to obtain necessary U.S. antitrust approvals, then we must pay Allergan $1 billion. In addition, as described above, the notes are subject to a special mandatory redemption. See “—Risks Related to the Notes—If the closing of the Actavis Generics acquisition does not occur on or prior to October 26, 2016, or if the Master Purchase Agreement is terminated at any time prior thereto, you may not obtain your expected return on the notes” and “Description of the Notes and the Guarantees—Special Mandatory Redemption.”

In connection with the closing of the Actavis Generics acquisition, due to regulatory requirements, Teva expects to divest products with aggregate revenues in 2015 of approximately $1.1 billion.

The actual financial positions and results of operations of Teva and Actavis Generics may differ materially from the unaudited pro forma financial data included in this prospectus supplement.

The pro forma financial information contained in this prospectus supplement is presented for illustrative purposes only and may not be an indication of what Teva’s financial position or results of operations would have been had the transaction been completed on the dates indicated. The pro forma financial information has been derived from the audited and unaudited historical financial statements of Teva and Actavis Generics, and certain adjustments and assumptions have been made regarding the combined businesses after giving effect to the transaction. The assets and liabilities of Actavis Generics have been measured at fair value based on various preliminary estimates using assumptions that Teva’s management believes are reasonable utilizing information currently available. The process for estimating the fair value of acquired assets and assumed liabilities requires the use of judgment in determining the appropriate assumptions and estimates. These estimates may be revised as additional information becomes available and as additional analyses are performed. Differences between preliminary estimates in the pro forma financial information and the final acquisition accounting will occur and could have a material impact on the pro forma financial information and the combined company’s financial position and future results of operations.

In addition, the assumptions used in preparing the pro forma financial information may not prove to be accurate, and other factors may affect Teva’s financial condition or results of operations following the closing. Any potential decline in Teva’s financial condition or results of operations may cause significant variations in Teva’s share price.

Teva will incur direct and indirect costs as a result of the Actavis Generics acquisition.

Teva will incur substantial expenses in connection with and as a result of completing the Actavis Generics acquisition and, over a period of time following the completion of the Actavis Generics acquisition, Teva further

 

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expects to incur substantial expenses in connection with coordinating the businesses, operations, policies and procedures of Teva with that of Actavis Generics. While Teva has assumed that a certain level of transaction expenses will be incurred, factors beyond Teva’s control could affect the total amount or the timing of these expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately.

Risks Related to the Notes

If the closing of the Actavis Generics acquisition does not occur on or prior to October 26, 2016, or if the Master Purchase Agreement is terminated at any time prior thereto, you may not obtain your expected return on the notes.

If the closing of the Actavis Generics acquisition does not occur on or prior to October 26, 2016, or if the Master Purchase Agreement is terminated at any time prior thereto, the notes will be subject to a special mandatory redemption. The redemption price will be a price equal to 101% of their aggregate principal amount, plus accrued and unpaid interest, if any, from the date of initial issuance of the notes, up to, but not including, the special redemption date (as defined under “Description of the Notes and the Guarantees—Special Mandatory Redemption”).

Our ability to consummate the Actavis Generics acquisition is subject to the satisfaction of various conditions, certain of which are beyond our control, including receipt of U.S. antitrust approval from the FTC. In the event that we do not consummate the Actavis Generics acquisition on or before October 26, 2016, or the Master Purchase Agreement is terminated within the specified timeframe and Teva Finance becomes required to redeem the notes, you may not obtain your expected return on such notes and may not be able to reinvest the proceeds from a special mandatory redemption in an investment that results in a comparable return. Your decision to invest in the notes is made at the time of the offering of the notes.

We may be unable to redeem any or all of the notes in the event of a special mandatory redemption.

If the closing of the Actavis Generics acquisition does not occur on or prior to October 26, 2016, or if the Master Purchase Agreement is terminated at any time prior thereto, Teva Finance will be obligated to redeem all of the notes at a redemption price equal to 101% of their aggregate principal amount, plus accrued and unpaid interest, if any, from the date of initial issuance of the notes up to, but not including, the special redemption date. See “Description of the Notes and the Guarantees—Special Mandatory Redemption.” Teva Finance is not obligated to place the proceeds of the offering of any notes in escrow prior to the completion of the Actavis Generics acquisition or to provide a security interest in those proceeds. Accordingly, Teva Finance will need to fund any special mandatory redemption using proceeds that it has voluntarily retained or from other sources of liquidity. In the event of a special mandatory redemption, Teva Finance may not have sufficient funds to purchase any or all of the notes, which would constitute an event of default under the indenture.

There may not be liquid markets for the notes, and you may not be able to sell your notes at attractive prices or at all.

The notes are new issues of securities for which there is currently no trading market. Although one or more of the underwriters have advised us that they currently intend to make markets in the notes, they are not obligated to do so and may discontinue their market-making activities at any time without notice. We do not intend to apply for listing of the notes on any exchange or any automated quotation system. If active markets for the notes fails to develop or be sustained, the trading prices of the notes could fall, and even if active trading markets were to develop, the notes could trade at prices that may be lower than their respective initial offering prices. The trading price of the notes will depend on many factors, including:

 

    prevailing interest rates and interest rate volatility;

 

    the markets for similar securities;

 

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    our financial condition, results of operations and prospects;

 

    the publication of earnings estimates or other research reports and speculation in the press or investment community;

 

    the anticipated results of acquisitions, including our pending Actavis Generics acquisition;

 

    changes in our industry and competition; and

 

    general market and economic conditions.

As a result, we cannot assure you that you will be able to sell the notes at attractive prices or at all.

A downgrade, suspension or withdrawal of the rating assigned by a rating agency to the notes, if any, could cause the liquidity or market values of the notes to decline significantly.

We cannot assure you what ratings (including the expected downgrade in connection with the Actavis Generics acquisition) will be assigned to the notes. In addition, we cannot assure you that any rating so assigned will remain for any given period of time or that the rating will not be lowered or withdrawn entirely by the rating agency if in that rating agency’s judgment future circumstances relating to the basis of the rating, such as adverse changes in our business, so warrant.

As described above, following the announcement of the Actavis Generics acquisition, S&P and Moody’s downgraded Teva’s ratings to BBB and Baa1, respectively. Moody’s is expected to further downgrade Teva’s ratings in connection with the consummation of the Actavis Generics acquisition to Baa2 (as it already has with respect to the notes). A downgrade of Teva’s credit rating could negatively affect the liquidity or market values of the notes.

We may incur additional indebtedness that may adversely affect our ability to meet our financial obligations under the notes.

The terms of the notes do not impose any limitation on the ability of Teva, Teva Finance or any of Teva’s other subsidiaries to incur additional unsecured debt. We may incur additional unsecured indebtedness in the future, which could have important consequences to holders of notes, including that we could have insufficient cash to meet our financial obligations, including our obligations under the notes, and that our ability to obtain additional financing could be impaired.

Because Teva and Teva Finance are foreign entities, you may have difficulties enforcing your rights under the guarantees and under the notes.

Teva is an Israeli company. In addition, most of Teva’s officers, directors or persons of equivalent position reside outside of the United States. As a result, service of process on them may be difficult or impossible to effect in the United States. Furthermore, a substantial portion of our assets are located outside of the United States. Therefore, judgments obtained against us or any of our directors and officers may not be collectible within the United States and may not be enforced by an Israeli court.

Subject to various time limitations, an Israeli court may declare a judgment rendered by a foreign court in a civil matter, including judgments awarding monetary or other damages in non-civil matters, enforceable if it finds that:

 

  (1) the judgment was rendered by a court which was, according to the foreign country’s law, competent to render it;

 

  (2) the judgment is no longer appealable;

 

  (3) the obligation in the judgment is enforceable according to the rules relating to the enforceability of judgments in Israel and the substance of the judgment is not contrary to public policy in Israel; and

 

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  (4) the judgment can be executed in the state in which it was given.

A foreign judgment will not be declared enforceable by Israeli courts if it was given in a state, the laws of which do not provide for the enforcement of judgments of Israeli courts (subject to exceptional cases) or if its enforcement is likely to prejudice the sovereignty or security of Israel. An Israeli court also will not declare a foreign judgment enforceable if it is proven to the Israeli court that:

 

  (1) the judgment was obtained by fraud;

 

  (2) there was no due process;

 

  (3) the judgment was given by a court not competent to render it according to the laws of private international law in Israel;

 

  (4) the judgment conflicts with another judgment that was given in the same matter between the same parties and which is still valid; or

 

  (5) at the time the action was brought to the foreign court a claim in the same matter and between the same parties was pending before a court or tribunal in Israel.

Teva Finance is organized under the laws of The Netherlands, its managing and supervisory directors reside outside the United States, and all or a significant portion of the assets of such persons are, and substantially all of their assets are, located outside the United States. As a result, it may not be possible to effect service of process within the United States upon Teva Finance or any such person or to enforce against Teva Finance or any such person judgments obtained in United States courts predicated upon the civil liability provisions of the federal securities laws of the United States.

Because there is no treaty on the recognition and enforcement of judgments in civil and commercial matters between the United States and The Netherlands, courts in The Netherlands will not recognize and enforce a judgment rendered by a United States court. For a United States judgment to be enforced in The Netherlands, a judgment creditor must bring proceedings before a competent court in The Netherlands and seek a Dutch judgment enforcing the liability of the judgment debtor. If the party in whose favor such a final judgment by a United States court is rendered brings a new suit in a competent court in The Netherlands, that party may submit to the Dutch court the final judgment that has been rendered in the United States. Based on the current practice of courts in The Netherlands, it appears that a final money judgment rendered by a United States federal or state court after a substantive review of the merits (and not by mere “default judgment”) will be given effect by a Dutch court, without any re-examination of the merits of the original judgment, provided that:

 

  (1) the United States court exercised personal jurisdiction over the judgment debtor based on grounds that were internationally acceptable;

 

  (2) the judgment resulted from legal proceedings compatible with Dutch notions of due process; and

 

  (3) the judgment did not contravene any public policy of The Netherlands.

There is doubt as to whether a Dutch court would accept jurisdiction and impose civil liability on Teva Finance, its officers, directors or persons of equivalent position in an original action brought in a court of competent jurisdiction in The Netherlands against Teva Finance or such officers, directors or persons of equivalent position if such an action is predicated solely upon the federal securities laws of the United States.

The guarantees will effectively be subordinated to some of our existing and future indebtedness.

Teva will irrevocably and unconditionally guarantee the punctual payment when due of the principal of and interest, if any, on the notes. As indebtedness of Teva, the guarantees will be Teva’s general, unsecured obligations and will rank equally in right of payment with all of Teva’s existing and future unsubordinated, unsecured indebtedness. The guarantees will be effectively subordinated to any existing and future secured

 

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indebtedness Teva may have up to the value of the collateral securing that indebtedness and structurally subordinated to any existing and future liabilities and other indebtedness of our subsidiaries with respect to the assets of those subsidiaries. These liabilities may include debt securities, credit facilities, trade payables, guarantees, lease obligations, letter of credit obligations and other indebtedness. See “Description of the Notes and the Guarantees—Description of the Guarantees.” The indenture governing the notes does not restrict us or our subsidiaries from incurring debt in the future, nor does the indenture limit the amount of indebtedness we can issue that is equal in right of payment. At March 31, 2016, Teva had no secured indebtedness outstanding, and its subsidiaries, other than finance subsidiaries, had approximately $10.2 billion of indebtedness outstanding.

Teva may be subject to restrictions on receiving dividends and other payments from its subsidiaries.

Teva’s income is derived in large part from its subsidiaries. Accordingly, Teva’s ability to pay its obligations under the guarantees depends in part on the earnings of its subsidiaries and the payment of those earnings to Teva, whether in the form of dividends, loans or advances. Such payment by Teva’s subsidiaries to Teva may be subject to restrictions. The indenture governing the notes does not restrict Teva, Teva Finance or Teva’s other subsidiaries from entering into agreements that contain such restrictions.

The vote by the United Kingdom to leave the EU could adversely affect us.

The recent United Kingdom referendum on its membership in the EU resulted in a majority of U.K. voters voting to exit the EU (“Brexit”). As a result, we face risks associated with the potential uncertainty and consequences that may follow Brexit, including with respect to volatility in exchange rates and interest rates. Brexit could adversely affect European or worldwide political, regulatory, economic or market conditions and could contribute to instability in global political institutions, regulatory agencies and financial markets. Any of these effects of Brexit, and others we cannot anticipate, could adversely affect our business, results of operations and financial condition.

 

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FORWARD-LOOKING STATEMENTS

Our disclosure and analysis in this prospectus supplement contain or incorporate by reference some forward-looking statements. Forward-looking statements describe our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Such statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. In particular, these statements include, among other things, statements relating to:

 

    our business strategy;

 

    the anticipated results of acquisitions, including our pending Actavis Generics acquisition;

 

    the development and launch of our products, including product approvals and results of clinical trials;

 

    projected markets and market size;

 

    anticipated results of litigation and regulatory proceedings;

 

    our projected revenues, market share, expenses, net income margins and capital expenditures; and

 

    our liquidity.

This prospectus supplement contains or incorporates by reference forward-looking statements, which express the current beliefs and expectations of management and involve a number of known and unknown risks and uncertainties that could cause our future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause or contribute to such differences include risks relating to: our ability to develop and commercialize additional pharmaceutical products; competition for our specialty products, especially Copaxone® (including competition from orally-administered alternatives, as well as from generic equivalents such as the recently launched Sandoz product) and our ability to continue to migrate users to our 40 mg/mL version and maintain patients on that version; our ability to identify and successfully bid for suitable acquisition targets or licensing opportunities, or to consummate and integrate acquisitions (such as our pending Actavis Generics acquisition); the possibility of material fines, penalties and other sanctions and other adverse consequences arising out of our ongoing FCPA investigations and related matters; our ability to achieve expected results from the research and development efforts invested in our pipeline of specialty and other products; our ability to reduce operating expenses to the extent and during the timeframe intended by our cost reduction program; the extent to which any manufacturing or quality control problems damage our reputation for high quality production and require costly remediation; increased government scrutiny in both the U.S. and Europe of our patent settlement agreements, confidentiality agreements and other measures to protect the intellectual property rights of our specialty medicines; the effects of reforms in healthcare regulation and pharmaceutical pricing, reimbursement and coverage; governmental investigations into sales and marketing practices, particularly for our specialty pharmaceutical products; adverse effects of political or economic instability, corruption or acts of terrorism on our significant worldwide operations; interruptions in our supply chain or problems with internal or third-party information technology systems that adversely affect our complex manufacturing processes; significant disruptions of our information technology systems or breaches of our security data; competition for our generic products, both from other pharmaceutical companies and as a result of increased governmental pricing pressures; competition for our specialty pharmaceutical businesses from companies with greater resources and capabilities; the impact of continuing consolidation of our distributors and customers; decreased opportunities to obtain U.S. market exclusivity for new generic products; potential liability in the U.S., Europe and other foreign markets for sales of generic products prior to a final resolution of outstanding patent litigation; our potential exposure to product liability claims that are not covered by insurance; any failure to retain key personnel, or to attract additional executive and managerial talent; any failures to comply with the complex Medicare and Medicaid reporting and payment obligations; significant impairments charges relating to intangible assets goodwill and property, plant and equipment; the effects of the increase of leverage and our resulting reliance on access to the capital markets; potentially significant increases in tax liabilities; the effect on our

 

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overall effective tax rate of the termination or expiration of governmental programs or tax benefits, or a change in our business; variations in patent laws that may adversely affect our ability to manufacture products in the most efficient manner; environmental risks; and other factors that are discussed in this prospectus supplement including under “Risk Factors” above, our Annual Report on Form 20-F for the year ended December 31, 2015, and in our other filings with the SEC.

Forward-looking statements speak only as of the date on which they are made and we assume no obligation to update or revise any forward-looking statements or other information contained herein, whether as a result of new information, future events or otherwise, except as may be required by law. You are advised, however, to consult any additional disclosures we make in our Annual Reports on Form 20-F and our Reports of Foreign Private Issuer on Form 6-K that are filed with the SEC. Also note that we provide a cautionary discussion of risks and uncertainties under “Risk Factors” above. These are factors that we believe could cause our actual results to differ materially from expected results. Other factors besides those listed here or in the accompanying prospectus could also adversely affect us. This discussion is provided as permitted by the Private Securities Litigation Reform Act of 1995.

 

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CAPITALIZATION

The following table sets forth Teva’s capitalization as of March 31, 2016:

 

    on a historical basis;

 

    on an as adjusted basis to give effect to the issuance and sale of the notes offered hereby (but not the application of expected proceeds therefrom);

 

    on an as further adjusted basis to give effect to the proposed debt financings (but not the application of expected proceeds therefrom), including the anticipated Euro senior notes offering and CHF senior notes offering, in the aggregate principal amount of approximately $5 billion; and

 

    on a pro forma basis to give effect to the consummation of the Actavis Generics acquisition, including additional borrowings of approximately $5 billion under a term loan facility and $2.8 billion under its short-term credit facilities, the issuance of approximately 100 million of Teva’s ordinary shares to Allergan, the contemplated divestitures, estimated transaction costs, and the application of the net proceeds from this offering and the proposed other debt financings.

You should read this table together with our financial statements and pro forma financial information included or incorporated by reference in this prospectus supplement, as well as the information under “Summary—Actavis Generics Acquisition,” “Risk Factors” and “Use of Proceeds.” Investors in the notes should not place undue reliance on the as adjusted information included in this prospectus supplement because this offering is not contingent upon any of the transactions reflected in the adjustments included in the following information.

 

     March 31, 2016  
     Actual      As Adjusted
for this
Offering
     As Further
Adjusted for
the Proposed
Other Debt
Financings
     Pro Forma
for the
Actavis
Generics
Acquisition
 
     U.S. Dollars in Millions  

0.25% Convertible Senior Debentures due 2026

   $ 514       $ 514       $ 514       $ 514   

Other short-term debt, including current maturities

     1,067         1,067         1,067         4,147   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total short-term debt

     1,581         1,581         1,581         4,661   
  

 

 

    

 

 

    

 

 

    

 

 

 

0.99% and 1.42% JPY Term Loans due 2017 and 2019(1)

     894         894         894         894   

JPY LIBOR +0.3% Term Loan due 2018(1)

     311         311         311         311   

1.500% CHF Senior Notes due 2018(2)

     466         466         466         466   

2.875% EUR Senior Notes due 2019(3)

     1,132         1,132         1,132         1,132   

2.250% Senior Notes due 2020

     700         700         700         700   

3.650% Senior Notes due 2021

     1,198         1,198         1,198         1,198   

2.950% Senior Notes due 2022

     843         843         843         843   

1.25% EUR Senior Notes due 2023(4)

     1,462         1,462         1,462         1,462   

1.875% EUR Senior Notes due 2027(5)

     790         790         790         790   

6.150% Senior Notes due 2036

     780         780         780         780   

1.400% Senior Notes due 2018(6)

     —           1,500         1,500         1,500   

1.700% Senior Notes due 2019(6)

     —           2,000         2,000         2,000   

2.200% Senior Notes due 2021(6)

     —           3,000         3,000         3,000   

2.800% Senior Notes due 2023(6)

     —           3,000         3,000         3,000   

3.150% Senior Notes due 2026(6)

     —           3,500         3,500         3,500   

4.100% Senior Notes due 2046(6)

     —           2,000         2,000         2,000   

Euro and CHF senior note offerings(7)

     —           —           5,000         5,000   

Term facilities

     15         15         15         15   

New term loan facilities, net of current maturities

     —           —           —           4,750   

Other long-term debt, net of current maturities

     28         28         28         28   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total long-term debt

   $ 8,619       $ 23,619       $ 28,619       $ 33,369   

 

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     March 31, 2016  
     Actual     As Adjusted
for this
Offering
    As Further
Adjusted for
the Proposed
Other Debt
Financings
    Pro Forma
for the
Actavis
Generics
Acquisition
 
     U.S. Dollars in Millions  

Equity:

        

Teva shareholders’ equity:

        

Mandatory Convertible Preferred Shares of NIS 0.10 par value per share; authorized 5 million shares; issued and outstanding 3.7 million shares

   $ 3,620      $ 3,620      $ 3,620      $ 3,620   

Ordinary shares of NIS 0.10 par value per share; authorized 2,500 million shares; issued and outstanding 1,022 million shares(8)

   $ 52      $ 52      $ 52      $ 55   

Additional paid-in capital(8)

     18,096        18,096        18,096        22,846   

Retained earnings

     15,110        15,110        15,110        15,597   

Accumulated other comprehensive loss

     (2,236     (2,236     (2,236     (2,236

Treasury shares—108 million ordinary shares

     (4,207     (4,207     (4,207     (4,207
  

 

 

   

 

 

   

 

 

   

 

 

 
     30,435        30,435        30,435        35,675   
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-controlling interests

     156        156        156        156   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total equity

     30,591        30,591        30,591        35,831   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total capitalization

   $ 40,791      $ 55,791      $ 60,791      $ 73,861   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) ¥100.6 billion senior unsecured fixed-rate term loan facility (equivalent amount based on exchange rate published by Bloomberg of ¥112.57 to $1 on March 31, 2016).
(2) CHF 450 million senior notes (equivalent amount based on the exchange rate published by Bloomberg of CHF 0.9618 to $1 on March 31, 2016).
(3) €1 billion senior notes (equivalent amount based on the exchange rate published by Bloomberg of €0.8787 to $1 on March 31, 2016).
(4) €1.3 billion senior notes (equivalent amount based on the exchange rate published by Bloomberg of €0.8787 to $1 on March 31, 2016).
(5) €700 million senior notes (equivalent amount based on the exchange rate published by Bloomberg of €0.8787 to $1 on March 31, 2016).
(6) Represents the aggregate principal amount of the notes, excluding any offering discounts and deferred financing fees.
(7) Represents the Euro and CHF senior note offerings in the assumed aggregate principal amount equivalent to approximately $5 billion. The Euro senior notes offering and the CHF senior notes offering will each be made by means of a separate, standalone offering memorandum, and not by means of this prospectus supplement. The amount and terms and conditions of the Euro senior notes offering and the CHF senior notes offering are subject to market conditions. There can be no assurance that we will be able to complete the Euro senior notes offering or the CHF senior notes offering on terms and conditions acceptable to us or at all. This offering is not contingent on the completion of the Euro senior notes offering or the CHF senior notes offering.
(8) Pro forma amounts include $4.8 billion from the issuance of approximately 100 million of Teva’s ordinary shares to Allergan, based on the closing price of a Teva ordinary share at July 6, 2016 of $50.31, adjusted to reflect lack of marketability, which is currently estimated by Teva at a rate of 5.8%.

 

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USE OF PROCEEDS

We estimate that the net proceeds to us from this offering, after deducting the underwriting discounts and estimated offering expenses payable by us, will be approximately $14.9 billion.

We expect to use the net proceeds of this offering, together with the net proceeds of our anticipated Euro senior notes offering and CHF senior notes offering, cash on hand (including the proceeds of our offerings of ADSs and mandatory convertible preferred shares in December 2015), borrowings under our new term loan facility and additional borrowings under our short-term credit facilities, to finance our acquisition of Actavis Generics, to pay related fees and expenses, and/or otherwise for general corporate purposes. Depending on the timing of the closing of the Actavis Generics acquisition, we may need to borrow additional funds under our bridge facility, which we expect to repay with the proceeds of this offering and the other contemplated offerings. See “Underwriting (Conflicts of Interest)—Conflicts of Interest.”

The closing of this offering is expected to occur prior to the consummation of the Actavis Generics acquisition. This offering is not conditioned upon the completion of the Actavis Generics acquisition. If the closing of the Actavis Generics acquisition does not occur on or prior to October 26, 2016, or if the Master Purchase Agreement is terminated at any time prior thereto, the notes will be subject to a special mandatory redemption. The redemption price will be a price equal to 101% of their aggregate principal amount, plus accrued and unpaid interest, if any, from the date of initial issuance of the notes up to, but not including, the special redemption date (as defined under “Description of the Notes and the Guarantees—Special Mandatory Redemption”).

For a description of Actavis Generics and information regarding the acquisition, see “Summary—Actavis Generics Acquisition.” We entered into a $22 billion bridge loan credit agreement in September 2015 to finance a portion of the Actavis Generics acquisition. Any loan under the bridge facility would bear interest at LIBOR plus a margin ranging from 0.30% to 1.65%, so long as Teva maintains an investment-grade credit rating. The initial maturity date for the bridge facility is the earlier of twelve months from the drawdown date and July 31, 2017, subject to extensions.

SOURCES AND USES

The following table outlines the sources and uses of funds for the Actavis Generics acquisition, as if the Actavis Generics acquisition was completed as of March 31, 2016 (the assumed closing date of the Actavis Generics acquisition for purposes of the unaudited pro forma condensed combined balance sheet contained in “Unaudited Pro Forma Condensed Combined Financial Statements”). The table assumes we complete the Actavis Generics acquisition and the Financing Transactions simultaneously. The actual amounts may vary from estimated amounts depending on the actual closing date of the Actavis Generics acquisition and the actual amounts of net proceeds from the Financing Transactions. Depending on the timing of the closing of the Actavis Generics acquisition, we may need to borrow additional funds under our bridge facility, which we expect to repay with the proceeds of this offering and the other contemplated offerings. The below table does not reflect the issuance of approximately 100 million of Teva’s ordinary shares to Allergan at the closing of the Actavis Generics acquisition as part of the consideration. You should read the following table together with the information included under the headings “Summary—Actavis Generics Acquisition,” “Summary—Financing Transactions” and “Unaudited Pro Forma Condensed Combined Financial Statements.”

 

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Sources of funds           Uses of funds       
     (in millions)           (in millions)  

Notes offered hereby and Euro and CHF senior note offerings(1)(2)

   $ 20,000      

Cash consideration for Actavis Generics

Transaction fees and expenses(4)

   $

 

33,530

100

  

  

New term loan facility(3)

     5,000         

Cash on hand (including proceeds from the ADSs and mandatory convertible preferred shares offering)

     5,800         

Borrowings under short-term credit facilities

     2,830         
  

 

 

       

 

 

 

Total sources of funds

   $ 33,630       Total uses of funds    $ 33,630   
  

 

 

       

 

 

 

 

(1) Represents the aggregate principal amount of the notes offered hereby before deducting underwriting discounts and expenses. This offering is not contingent on completion of the Actavis Generics acquisition. If the closing of the Actavis Generics acquisition does not occur on or prior to October 26, 2016, or if the Master Purchase Agreement is terminated at any time prior thereto, Teva Finance will be required to redeem the notes at a redemption price equal to 101% of their aggregate principal amount, plus accrued and unpaid interest from the date of initial issuance of the notes up to, but not including, the special redemption date (as defined under “Description of the Notes and the Guarantees—Special Mandatory Redemption”). See “Description of the Notes and the Guarantees—Special Mandatory Redemption.”

 

(2) Includes the assumed aggregate principal amount, in U.S. dollar equivalent amount, of the senior notes offered in the Euro and CHF senior note offerings before deducting discounts and estimated expenses. Pursuant to separate offering memoranda, we anticipate offering through finance subsidiaries senior notes denominated in Euro and Swiss francs. The completion of this offering is not contingent on the completion of either the Euro or CHF senior note offerings, and the completion of the Euro and CHF senior note offerings is not contingent on the completion of this offering. There is no assurance that we will complete the Euro and CHF senior note offerings on terms and conditions acceptable to us or at all.

 

(3) We previously entered into a $5 billion term loan facility with various banks to finance a portion of the Actavis Generics acquisition. The term facility contemplates two tranches of $2.5 billion each, with the first tranche maturing in full after three years and bearing an interest rate of LIBOR plus a margin ranging from 1.000% to 1.375% based on our credit rating from time to time, and the second tranche maturing in five years with payment installments each year and bearing an interest rate of LIBOR plus a margin ranging from 1.125% to 1.5% based on our credit rating from time to time.

 

(4) Includes estimated fees and expenses related to the Actavis Generics acquisition, including discounts and commissions, legal, accounting and advisory fees associated with the Financing Transactions and other transaction costs.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The unaudited pro forma condensed combined statements of operations (“pro forma statements of operations”) for the three months ended March 31, 2016 and for the year ended December 31, 2015 have been prepared by Teva and give effect to the acquisition of Actavis Generics (including expected divestitures and financing that will occur upon consummation of the acquisition of Actavis Generics) as if the transaction had occurred on January 1, 2015.

The unaudited pro forma condensed combined balance sheet (“pro forma balance sheet”) as of March 31, 2016 combines the historical consolidated balance sheets of Teva and Actavis Generics (including expected divestitures and financing that will occur upon consummation of the acquisition of Actavis Generics) as if the transactions had occurred on March 31, 2016.

In the preparation of the unaudited pro forma financial information, Teva has received limited information from Allergan. Full access to all relevant information of Actavis Generics will only be available to Teva upon closing of the acquisition due to regulatory restrictions.

The historical consolidated financial information has been adjusted to give effect to pro forma events that are: (i) directly attributable to the aforementioned transactions, (ii) factually supportable, and (iii) with respect to the unaudited pro forma statements of operations, expected to have a continuing impact on the combined results.

The unaudited pro forma condensed combined financial statements (“pro forma financial statements”) should be read in conjunction with the accompanying notes to the unaudited pro forma financial statements. In addition, the unaudited pro forma financial statements were based on and should be read in conjunction with the:

 

    Unaudited condensed consolidated financial statements of Teva as of and for the three months ended March 31, 2016 and the related notes, included in Teva’s Report of Foreign Private Issuer on Form 6-K, as filed with the SEC on May 9, 2016;

 

    Audited consolidated financial statements of Teva as of and for the year ended December 31, 2015 and the related notes, included in Teva’s Annual Report on Form 20-F for the year ended December 31, 2015, as filed with the SEC on February 11, 2016;

 

    Unaudited abbreviated special purpose combined statements of net assets acquired and revenues and direct expenses (“abbreviated special purpose combined financial statements”) of Actavis Generics as of and for the three months ended March 31, 2016, as filed with the SEC on Form 6-K on July 13, 2016; and

 

    Audited abbreviated special purpose combined financial statements of Actavis Generics as of and for the year ended December 31, 2015, as filed with the SEC on Form 6-K on July 13, 2016.

The unaudited pro forma financial statements are for informational purposes only. They do not purport to indicate the actual results that would have been attained had the acquisition of Actavis Generics been completed on the assumed dates or for the periods presented. In addition, the unaudited pro forma financial statements do not purport to project the future financial position or operating results of Teva following the acquisition of Actavis Generics.

The unaudited pro forma financial statements have been prepared assuming the application of the purchase method of accounting under U.S. GAAP, with Teva being the accounting acquirer.

To produce the unaudited pro forma financial statements, Teva allocated the estimated purchase price for the acquisition of Actavis Generics using its best estimates of fair value. To the extent there are changes to the business of Actavis Generics or we obtain additional or more complete information related to the underlying assets and liabilities acquired, the assumptions and estimates herein could change significantly. The allocation of the purchase price is dependent upon certain valuations and other studies that are not yet finalized. Accordingly, the pro forma acquisition adjustments are preliminary, and subject to further adjustments, as additional information becomes available, and as additional analyses are performed. There can be no assurance that the final valuation will not result in material changes to the unaudited pro forma financial statements.

 

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In addition, the unaudited pro forma financial statements do not reflect any cost savings (or the associated costs to achieve such savings), operating synergies or revenue enhancements that the combined company may achieve following the acquisition of Actavis Generics.

Furthermore, Teva could have additional expenses as a result of post-closing restructuring activities. The unaudited pro forma financial statements do not reflect such potential expenses, which could be significant.

 

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Unaudited Pro Forma Condensed Combined Balance Sheet as of March 31, 2016

(U.S. $ in millions)

 

    Historical     Special purpose,
as adjusted*
    Pro forma adjustments      
    Teva     Actavis Generics     PPA and other
adjustments
    Note     Divestitures     Note     Financing
adjustments
    Note   Teva/Actavis
Generics pro
forma combined
 
    I     II     III           IV           V         I+II+III+IV+V  

ASSETS

                 

Current assets:

                 

Cash and cash equivalents

  $ 5,964      $ —        $ (46     4c      $ —          $ 27,667      6a   $ —     
        (33,550     3,4a        —            (35   6c  

Accounts receivable

    5,188        3,108        —            (59     4i        —            8,237   

Inventories

    3,963        1,191        800        4d        (65     4i        —            5,889   

Deferred income taxes

    805        —          —            —            —            805   

Other current assets

    1,074        311        —            3,087        4i,4j        —            4,472   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Total current assets

    16,994        4,610        (32,796       2,963          27,632          19,403   

Other non-current assets

    2,661        274        —            (4     4i        —            2,931   

Property, plant and equipment, net

    6,632        1,292        —          4e        (37     4i        —            7,887   

Identifiable intangible assets, net

    8,566        2,580        20,016        4f        (33     4j        —            28,549   
        (2,580     4f        —            —         

Goodwill

    20,273        3,707        21,042        4g        (2,140     4i,4j        —            39,175   
        (3,707     4g        —            —         
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Total assets

  $ 55,126      $ 12,463      $ 1,975        $ 749        $ 27,632        $ 97,945   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

LIABILITIES AND EQUITY

                 

Current liabilities:

                 

Short-term debt

  $ 1,581      $ —        $ —          $ —          $ 22,882      6b,6c,6d   $ 24,463   

Sales reserves and allowances

    6,443        1,541        —            —            —            7,984   

Accounts payable and accruals

    3,528        872        (11     4c        —            —            4,389   

Other current liabilities

    1,353        100        260        4h        261        4i,4j        —            1,974   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Total current liabilities

    12,905        2,513        249          261          22,882          38,810   

Long-term liabilities:

                —         

Deferred income taxes

    1,698        311        6,497        4h        —            —            8,506   

Other taxes and long-term liabilities

    1,313        150        —            (34     4i        —            1,429   

Senior notes and loans

    8,619        —          —            —            4,750      6b,6e     13,369   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Total long-term liabilities

    11,630        461        6,497          (34       4,750          23,304   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Total liabilities

    24,535        2,974        6,746          227          27,632          62,114   

Equity:

                 

Shareholders’ equity:

                 

Preferred shares

    3,620        —          —            —            —            3,620   

Ordinary shares

    52        —          3        3,4a        —            —            55   

Additional paid-in capital

    18,096        —          4,750        3,4a        —            —            22,846   

Retained earnings

    15,110        —          (35     4c        522        4j        —            15,597   

Accumulated other comprehensive loss

    (2,236     —          —            —            —            (2,236

Treasury shares

    (4,207     —          —            —            —            (4,207
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 
    30,435        —          4,718          522          —            35,675   

Non-controlling interests

    156        —          —            —            —            156   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Total equity

    30,591        —          4,718          522          —            35,831   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Total liabilities and equity

  $ 55,126      $ 2,974      $ 11,464        $ 749        $ 27,632        $ 97,945   
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Net assets acquired

    $ 9,489      $ (9,489     4b             
   

 

 

   

 

 

             

 

* For reconciliation to the abbreviated special purpose combined financial statements, refer to note 2.

 

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Unaudited Pro Forma Condensed Combined Statements of Operations

For the Three Months Ended March 31, 2016

(U.S. $ in millions, except share and per share amounts)

 

        Historical     Special
purpose, as

adjusted*
    Pro forma adjustments        
        Teva     Actavis
Generics
    PPA and
other
adjustments
    Note   Divestitures     Note     Financing
adjustments
    Note     Teva/Actavis
Generics pro
forma
combined
 
        I     II     III         IV           V           I+II+III+IV+V  

Net revenues

    $ 4,810      $ 1,289      $ (6   5c   $ (290     5d      $ —          $ 5,803   

Cost of sales

      2,019        821        303      5a,5b,5c     (114     5d        —            3,029   
   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Gross profit

      2,791        468        (309       (176       —            2,774   

Research and development expenses

      389        114        —            (2     5d        —            501   

Selling and marketing expenses

      839        115        —            (8     5d        —            946   

General and administrative expenses

      304        141        —            (3     5d        —            442   

Impairments, restructuring and others

      119        10        (13   5f     —            (6     6c        110   

Legal settlements and loss contingencies

      (25     —          —            —            —            (25
   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Operating income

      1,165        88        (296       (163       6          800   

Financial expenses—net

      298        —          —            —            118        6f        416   
   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Income before income taxes

      867        88        (296       (163       (112       384   

Income taxes

      228        —          (72   5g     (50     5d        (22     6i        84   

Share in losses of associated companies—net

      6        —          —            —            —            6   
   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Net income

      633        88        (224       (113       (90       294   

Net loss attributable to non-controlling interests

      (3     —          —            —            —            (3
   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Net income attributable to Teva

      636        88        (224       (113       (90       297   
   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Dividends on preferred shares

      66        —          —            —            —            66   
   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Net income attributable to ordinary shareholders

    $ 570      $ 88      $ (224     $ (113     $ (90     $ 231   
   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Earnings per share attributable to ordinary shareholders:

  Basic   $ 0.62                    $ 0.23   
   

 

 

                 

 

 

 
  Diluted   $ 0.62                    $ 0.23   
   

 

 

                 

 

 

 

Weighted average number of shares (in millions):

  Basic     913          100      5h             1,013   
   

 

 

     

 

 

             

 

 

 
  Diluted     920          100      5h             1,020   
   

 

 

     

 

 

             

 

 

 

 

* For reconciliation to the abbreviated special purpose combined financial statements, refer to note 2.

 

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Unaudited Pro Forma Condensed Combined Statements of Operations

For the Year Ended December 31, 2015

(U.S. $ in millions, except share and per share amounts)

 

        Historical     Special
purpose, as
adjusted*
    Pro forma adjustments        
        Teva     Actavis
Generics
    PPA and
other
adjustments
    Note   Divestitures     Note     Financing
adjustments
    Note     Teva/Actavis
Generics pro
forma
combined
 
        I     II     III         IV           V           I+II+III+IV+V  

Net revenues

    $ 19,652      $ 6,184      $ (23   5c   $ (1,105     5d      $ —          $ 24,708   

Cost of sales

      8,296        3,595        1,097      5a,5b,5c     (428     5d        —            12,560   
   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Gross profit

      11,356        2,589        (1,120       (677       —            12,148   

Research and development expenses

      1,525        427        —            (6     5d        —            1,946   

Selling and marketing expenses

      3,478        537        —            (30     5d        —            3,985   

General and administrative expenses

      1,239        655        (97   5e     (10     5d        —            1,787   

Impairments, restructuring and others

      1,131        153        (53   5f     —            (19     6c        1,212   

Legal settlements and loss contingencies

      631        —          —            —            —            631   
   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Operating income

      3,352        817        (970       (631       19          2,587   

Financial expenses—net

      1,000        —          —            —            389        6f        1,389   
   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Income before income taxes

      2,352        817        (970       (631       (370       1,198   

Income taxes

      634        —          (68   5g     (198     5d        (74     6i        294   

Share in losses of associated companies—net

      121        —          —            —            —            121   
   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Net income

      1,597        817        (902       (433       (296       783   

Net income attributable to non-controlling interests

      9        —          —            —            —            9   
   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Net income attributable to Teva

      1,588        817        (902       (433       (296       774   
   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Dividends on preferred shares

      15        —          —            —            —            15   
   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Net income attributable to ordinary shareholders

    $ 1,573      $ 817      $ (902     $ (433     $ (296     $ 759   
   

 

 

   

 

 

   

 

 

     

 

 

     

 

 

     

 

 

 

Earnings per share attributable to ordinary shareholders:

  Basic   $ 1.84                    $ 0.79   
   

 

 

                 

 

 

 
  Diluted   $ 1.82                    $ 0.79   
   

 

 

                 

 

 

 

Weighted average number of shares (in millions):

  Basic     855          100      5h             955   
   

 

 

     

 

 

             

 

 

 
  Diluted     864          100      5h             964   
   

 

 

     

 

 

             

 

 

 

 

* For reconciliation to the abbreviated special purpose combined financial statements, refer to note 2.

 

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Notes to Unaudited Pro Forma Financial Statements

 

1. General

On July 26, 2015, Teva entered into the Master Purchase Agreement with Allergan to acquire Actavis Generics. Following an amendment to the Master Purchase Agreement dated July 11, 2016, Teva will pay total consideration of $33.5 billion in cash and approximately 100 million Teva ordinary shares to be issued to Allergan at the closing of the acquisition. Closing of the acquisition is subject to certain conditions, including U.S. antitrust approval. Subject to satisfaction of the closing conditions, Teva expects the acquisition to close shortly, based upon its current estimate of the timing to obtain clearance from the U.S. Federal Trade Commission.

On March 3, 2016, Teva completed the acquisition of Representaciones e Investigaciones Médicas, S.A. de C.V. (“Rimsa”), a leading pharmaceutical manufacturing and distribution company in Mexico, along with a portfolio of products and companies, intellectual property, assets and pharmaceutical patents in Latin America and Europe, for an amount of $2.3 billion, in a cash free, debt free set of transactions. Teva financed the transaction using cash on hand. Accordingly, the acquired assets and liabilities and the preliminary purchase price allocation are already reflected in the unaudited pro forma balance sheet at March 31, 2016. Amounts related to the unaudited pro forma statements of operations were recorded from the date of the transaction. Amounts for the period prior to the acquisition were not material and are not presented in the accompanying unaudited pro forma statements of operations.

On April 1, 2016, Teva and Takeda Pharmaceutical Company Limited (“Takeda”) established Teva Takeda Yakuhin Ltd., a new business venture in Japan. The business venture combines Teva’s Japanese generics business along with Takeda’s portfolio of non-exclusive products. Teva assigned 49% in the business venture to Takeda in consideration for the contribution of its off-patented products business in Japan. The business venture will be consolidated in Teva’s financial statements commencing April 1, 2016, and is expected to increase Teva’s sales in the Japanese market. Takeda’s interest in the business venture will be accounted for under “net income (loss) attributable to non-controlling interests.” Amounts related to the unaudited pro forma balance sheet and statements of operations were not material and are not presented in the accompanying unaudited pro forma balance sheet and statements of operations.

On May 5, 2015, Teva acquired Auspex Pharmaceuticals, Inc. (“Auspex”), an innovative biopharmaceutical company specializing in applying deuterium chemistry to known molecules to create novel therapies with improved safety and efficacy profiles, for net cash consideration of $3.3 billion. Accordingly, the acquired assets and liabilities are already reflected in the unaudited pro forma balance sheet. Amounts related to the unaudited pro forma statements of operations were recorded from the date of the transaction. Amounts for the period prior to the acquisition were not material and are not presented in the unaudited pro forma statements of operations.

During the third quarter of 2015, Teva acquired stakes in Gecko Health Innovations, Inc., Immuneering Corporation and Microchips Biotech, Inc. for an aggregate of approximately $102 million and certain contingent payments. Accordingly, acquired assets and liabilities are already reflected in the unaudited pro forma balance sheet. Amounts related to the unaudited pro forma statements of operations were recorded from the date of the transaction. Amounts for periods prior to the acquisitions were not material and are not presented in the unaudited pro forma statements of operations.

For purposes of the unaudited pro forma statements of operations, the acquisitions by Actavis Generics of Auden Mckenzie Holdings Limited and the sale of its Australian business during 2015, were recorded in the unaudited pro forma statements of operations from the date of the transaction. Amounts for the periods prior to such transactions were not material.

The cumulative impact of the above transactions by Actavis Generics and Teva, which are not presented in the unaudited pro forma financial statements, is considered to be immaterial.

 

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For purposes of preparing the unaudited pro forma balance sheet as of March 31, 2016, Teva has presented the following information:

 

    The Teva unaudited consolidated balance sheet as of March 31, 2016;

 

    The Actavis Generics unaudited abbreviated special purpose as adjusted combined statement of net assets as of March 31, 2016. For reconciliation to the abbreviated special purpose combined financial statements, refer to note 2; and

 

    Pro forma adjustments to reflect the acquisition of Actavis Generics as if it had occurred on March 31, 2016, including:

 

    Purchase price allocations (“PPA”) and other adjustments;

 

    Impact of divestitures following regulatory requirements; and

 

    Financing-related adjustments.

For purposes of preparing the unaudited pro forma statements of operations for the three months ended March 31, 2016 and the year ended December 31, 2015, Teva has presented the following information:

 

    The Teva unaudited consolidated statements of income for the three months ended March 31, 2016 and the audited consolidated statements of income for the year ended December 31, 2015;

 

    The Actavis Generics unaudited abbreviated special purpose as adjusted combined statement of revenues and direct expenses for the three months ended March 31, 2016, and the audited abbreviated special purpose as adjusted combined statement of revenues and direct expenses for the year ended December 31, 2015. For reconciliation to the abbreviated special purpose combined financial statements, refer to note 2; and

 

    Pro forma adjustments to reflect the acquisition of Actavis Generics as if it had occurred on January 1, 2015, including:

 

    PPA and other adjustments;

 

    Impact of divestitures following regulatory requirements; and

 

    Financing-related adjustments.

Since the unaudited pro forma financial statements have been prepared based on preliminary estimates with the assistance of a third-party appraiser and limited access to Allergan’s detailed data, such estimates and assumptions applied are subject to change pending further review of the assets acquired and liabilities assumed, the final purchase price and our assessment of fair value. Differences from the preliminary estimates could exist and could be material.

 

2. Basis of Presentation

As of the date of this prospectus supplement, Teva has not completed the detailed valuation analyses necessary to determine the estimated fair market value of Actavis Generics’ assets to be acquired and liabilities to be assumed. As indicated in the notes to the unaudited pro forma financial statements, Teva has made certain adjustments to the historical book values of the assets and liabilities of Actavis Generics primarily to reflect preliminary estimates of the fair value of intangible assets acquired with the residual excess of the purchase price over the historical net assets of Actavis Generics recorded as goodwill. Actual results may differ from those reflected in the unaudited pro forma financial statements. Differences could arise after Teva has determined the final purchase price for Actavis Generics and has completed the valuation analyses necessary to finalize fair value estimates and identified any necessary conforming accounting changes or other acquisition-related adjustments for Actavis Generics. There can be no assurance that such finalization will not result in material changes from the unaudited pro forma financial statements and affect Teva’s future results of operations and financial condition.

 

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The unaudited pro forma financial statements were prepared assuming the application of the purchase method of accounting in accordance with Financial Accounting Standards Board’s Accounting Standards Codification, or ASC, Topic 805, Business Combinations, use of the fair value concepts defined in ASC Topic 820, Fair Value Measurement, and were based on the historical financial statements of Teva and the abbreviated special purpose combined financial statements of Actavis Generics.

The abbreviated special purpose combined financial statements of Actavis Generics include statements of net assets acquired and statements of revenues and direct expenses based upon relief from Regulation S-X Rule 3-05, Significant Acquisition Carve-out Financial Statement Reporting Requirements, obtained by Teva from the SEC. The net assets acquired include legal entities and assets and liabilities identified in accordance with the Master Purchase Agreement. These abbreviated special purpose combined financial statements include revenues generated by Actavis Generics, less expenses directly attributable to Actavis Generics, and allocations of direct operating costs incurred by Allergan relating to Actavis Generics. A provision for income taxes has not been presented in these abbreviated special purpose combined financial statements as Actavis Generics has not operated as a standalone unit and no allocation of Allergan’s income tax provision or benefit has historically been made to Actavis Generics per above. While the allocation of the provision for income taxes was impracticable, Teva will be acquiring or assuming certain income tax assets and liabilities which have been reflected in these financial statements. There was no direct interest expense incurred by or allocated to Actavis Generics as no third-party debt will be transferred as part of the acquisition. Therefore, no interest expense has been reflected in these abbreviated special purpose combined financial statements.

Acquisition-related transaction costs, such as investment banking, advisory, legal, valuations, and other professional fees, are not included as a component of consideration transferred but are expensed as incurred. These costs are not presented in the unaudited pro forma statements of operations because they will not have a continuing impact on the consolidated results of Teva.

In connection with the acquisition of Actavis Generics, total transaction costs expected to be incurred by Teva are estimated to be approximately $101 million (excluding costs payable related to the financing), of which $55 million were paid as of March 31, 2016.

The estimated acquisition-related transaction costs are reflected in the unaudited pro forma balance sheet as of March 31, 2016 as a reduction to cash and cash equivalents with a corresponding decrease to retained earnings and accounts payable. No tax effect was recorded for these costs as their deductibility has not been assessed yet and is not expected to be material.

Teva and Actavis Generics’ financial information is prepared in accordance with U.S. GAAP, with all amounts stated in U.S. dollars.

Certain comparative figures included in the abbreviated special purpose combined financial statements of Actavis Generics have been rounded to conform to the unaudited pro forma financial statements presentation.

Accounting policies and reclassifications

Following the acquisition, Teva will conduct a review of the accounting policies of Actavis Generics in an effort to determine if differences in accounting policies require restatement or reclassification of results of operations or reclassification of assets or liabilities to conform to Teva’s accounting policies and classifications. As a result of that review, Teva may identify differences between the accounting policies of Teva and Actavis Generics that, when conformed, could have a material impact on the unaudited pro forma financial statements. During the preparation of the unaudited pro forma financial statements, Teva was not aware of any material differences between accounting policies of Teva and Actavis Generics, except for certain reclassifications necessary to conform to Teva’s financial statements presentation, and accordingly, the unaudited pro forma financial statements do not assume any material differences in accounting policies between Teva and Actavis

 

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Generics. The abbreviated special purpose combined financial statement column in these unaudited pro forma financial statements includes the following reclassifications:

 

a. Reclassifications made to the Actavis Generics unaudited abbreviated special purpose combined statement of net assets as of March 31, 2016 to conform to the Teva presentation:

 

(U.S. $ in millions)    Special
purpose
     Reclassifications      Special
purpose, as
adjusted
 
     I      II      III=I+II  

ASSETS

        

Current assets:

        

Accounts receivable

   $ 2,014       $ 1,094       $ 3,108   

Inventories

     1,191         —           1,191   

Other current assets

     311         —           311   
  

 

 

    

 

 

    

 

 

 

Total current assets

     3,516         1,094         4,610   

Other non-current assets

     32         242         274   

Non-current deferred tax assets

     242         (242      —     

Property, plant and equipment, net

     1,292         —           1,292   

Identifiable intangible assets, net

     2,580         —           2,580   

Goodwill

     3,707         —           3,707   
  

 

 

    

 

 

    

 

 

 

Total assets

   $ 11,369       $ 1,094       $ 12,463   
  

 

 

    

 

 

    

 

 

 

LIABILITIES AND EQUITY

        

Current liabilities:

        

Sales reserves and allowances

   $ —         $ 1,541       $ 1,541   

Accounts payable and accruals

     1,319         (447      872   

Income tax payables

     77         (77      —     

Other current liabilities

     23         77         100   
  

 

 

    

 

 

    

 

 

 

Total current liabilities

     1,419         1,094         2,513   

Long-term liabilities:

        

Deferred income taxes

     311         —           311   

Other tax payables

     61         (61      —     

Long-term liabilities

     89         (89      —     

Other taxes and long term liabilities

     —           150         150   
  

 

 

    

 

 

    

 

 

 

Total long term liabilities

     461         —           461   
  

 

 

    

 

 

    

 

 

 

Total liabilities

   $ 1,880       $ 1,094       $ 2,974   
  

 

 

    

 

 

    

 

 

 

Net assets acquired

   $ 9,489       $ —         $ 9,489   
  

 

 

    

 

 

    

 

 

 

 

    A reclassification of accrued sales allowances of $1,094 million and $447 million from accounts receivable and accounts payable and accruals, respectively, to sales reserves and allowances;

 

    A reclassification of $242 million from non-current deferred tax assets to other non-current assets;

 

    A reclassification of $89 million from long term liabilities to other taxes and long term liabilities;

 

    A reclassification of $61 million from other tax payables to other taxes and long term liabilities; and

 

    A reclassification of $77 million from income tax payables, to other current liabilities.

 

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b. Reclassifications made to the Actavis Generics unaudited abbreviated special purpose combined statement of revenues and direct expenses for the three months ended March 31, 2016 to conform to the Teva presentation:

 

(U.S. $ in millions)    Special purpose      Reclassifications      Special purpose,
as adjusted
 
     I      II      III=I+II  

Net revenues

   $ 1,289       $ —         $ 1,289   

Cost of sales

     710         111         821   
  

 

 

    

 

 

    

 

 

 

Gross profit

     579         (111      468   

Research and development expenses

     114         —           114   

Selling and marketing expenses

     115         —           115   

General and administrative expenses

     141         —           141   

Amortization

     122         (122      —     

Impairments, restructuring and others

     —           10         10   

Other expense (income)

     (1      1         —     
  

 

 

    

 

 

    

 

 

 

Revenues less direct expenses

   $ 88       $ —         $ 88   
  

 

 

    

 

 

    

 

 

 

 

    A reclassification of $122 million from amortization to cost of sales;

 

    A reclassification of restructuring costs of $11 million from cost of sales to impairments, restructuring and others; and

 

    A reclassification of $1 million from other income to impairments, restructuring and others.

 

c. Reclassifications made to the Actavis Generics audited abbreviated special purpose combined statement of revenues and direct expenses for the year ended December 31, 2015 to conform to the Teva presentation:

 

(U.S. $ in millions)    Special purpose      Reclassifications      Special purpose,
as adjusted
 
     I      II      III=I+II  

Net revenues

   $ 6,184       $ —         $ 6,184   

Cost of sales

     3,048         547         3,595   
  

 

 

    

 

 

    

 

 

 

Gross profit

     3,136         (547      2,589   

Research and development expenses

     432         (5      427   

Selling and marketing expenses

     561         (24      537   

General and administrative expenses

     696         (41      655   

Amortization

     559         (559      —     

Asset sales, impairments and contingent consideration charges, net

     62         (62      —     

Impairments, restructuring and others

     —           153         153   

Other expense (income)

     9         (9      —     
  

 

 

    

 

 

    

 

 

 

Revenues less direct expenses

   $ 817       $ —         $ 817   
  

 

 

    

 

 

    

 

 

 

 

    A reclassification of $559 million from amortization to cost of sales;

 

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    A reclassification of restructuring costs of $12 million, $41 million, $24 million and $5 million from cost of sales, general and administrative expenses, selling and marketing expenses and research and development expenses, respectively, to impairments, restructuring and others;

 

    A reclassification of $62 million from asset sales, impairments and contingent consideration charges, net to impairments, restructuring and others; and

 

    A reclassification of $9 million from other expense (income) to impairments, restructuring and others.

 

3. Actavis Generics Purchase Price

Upon consummation of the acquisition of Actavis Generics, Allergan will receive total consideration of $38.3 billion, consisting of $33.5 billion in cash and approximately 100 million Teva ordinary shares as follows:

 

(U.S. $ in millions, except per share amount)       

Total cash consideration

   $ 33,550   

Price of Teva ordinary share at July 6, 2016

     50.31   

Lack of marketability discount rate

     5.8

Number of Teva ordinary shares to be issued to Allergan (in millions)

     100.3   
  

 

 

 

Total consideration from Teva ordinary shares to be issued to Allergan

     4,753   
  

 

 

 

Fair value of total consideration transferred

   $ 38,303   
  

 

 

 

The final cash consideration payable is subject to certain working capital adjustments. As the working capital at closing is not yet determinable, no effect for this adjustment is included in the pro forma financial statements.

Upon consummation of the acquisition, unvested equity awards of Actavis Generics will be replaced with substitute equity awards of Teva. The annual impact of the fair value of these awards was considered to be immaterial and therefore is not included in the unaudited pro forma financial statements.

The fair value of Teva ordinary shares issued to Allergan will be measured on the closing date of the acquisition at the then-current market price, adjusted to reflect lack of marketability, which is currently estimated by Teva at a rate of 5.8%. The lack of marketability originates from restrictions imposed on shares held by Allergan, mainly lack of registration rights prior to one year after the closing date of the acquisition. In addition, Allergan will be prohibited from transfers of the Teva shares during a 12-month lockup period or to certain competitors of Teva and activist investors, as well as to customary standstill limitations. Allergan agreed to vote its Teva shares, subject to certain exceptions relating to significant corporate transactions, in accordance with the recommendation of Teva’s board of directors and in favor of persons nominated and recommended to serve as directors by Teva’s board of directors. Refer also to note 4a below for a sensitivity analysis.

 

4. Actavis Generics Unaudited Pro Forma Balance Sheet Adjustments

The following summarizes the pro forma adjustments in the accompanying unaudited pro forma balance sheet in connection with the acquisition of Actavis Generics to give effect to the acquisition as if it had occurred on March 31, 2016 for purposes of the unaudited pro forma balance sheet.

 

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Assuming an acquisition date of March 31, 2016, the following is a preliminary estimate of the assets to be acquired and the liabilities to be assumed by Teva in connection with the acquisition of Actavis Generics, reconciled to the estimated purchase price:

 

(U.S. $ in millions)    Note    Amount  

Purchase consideration

     

Fair value of total consideration transferred

   4a    $ 38,303   

Recognized amounts of identifiable assets acquired and liabilities assumed

     

Book value of net assets

   4b      9,489   

Elimination of Actavis Generics historical intangibles

   4f      (2,580

Elimination of Actavis Generics historical deferred tax on intangibles

   4f      359   

Elimination of Actavis Generics historical goodwill

   4g      (3,707
     

 

 

 

Net assets to be acquired

        3,561   

Preliminary estimate of fair value adjustments of net assets acquired

     

Inventories step-up

   4d      800   

Intangible assets, net

   4f      20,016   

Deferred income tax liability

   4h      (7,116
     

 

 

 
   4g      21,042   

Assets held for sale due to divestitures

   4i,4j      (2,140
     

 

 

 

Goodwill

   4g    $ 18,902   
     

 

 

 

 

a. As a result of the acquisition Teva will pay total consideration of $38.3 billion (calculated using the assumed share price and lack of marketability discount rate noted in note 3 above).

The table below depicts a sensitivity analysis of the estimated purchase consideration and goodwill, assuming a $5 and $10 increase or decrease of the closing price of Teva ordinary shares.

 

(in U.S. $, except number of shares issued)  
Price of Teva
ordinary share
     Number of
shares issued
     Calculated value of
share consideration*
     Cash
consideration
     Total purchase
price
     Total
goodwill
 
       in millions  
  $60.31         100.3       $ 5,698       $ 33,550       $ 39,248       $ 19,847   
  55.31         100.3         5,226         33,550         38,776         19,375   
  50.31         100.3         4,753         33,550         38,303         18,902   
  45.31         100.3         4,281         33,550         37,831         18,430   
  $40.31         100.3       $ 3,808       $ 33,550       $ 37,358       $ 17,957   

 

  * After loss of marketability discount rate of 5.8% as noted above.

 

b. Reflects the acquisition of net assets of Actavis Generics having a historical book value of $9.5 billion as of March 31, 2016.

 

c. Reflects an estimated remaining payment of $46 million of acquisition-related transaction costs, of which $35 million remain to be incurred by Teva. These fees are recorded against retained earnings solely for the purposes of this presentation. There is no continuing impact of these transaction costs on the combined operating results and, as such, these costs are excluded from the unaudited pro forma statements of operations. Refer to note 5f.

 

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d. Reflects a preliminary fair value adjustment of $800 million, which has been assigned to inventories to be acquired. The pro forma fair value adjustment is based on Actavis Generics’ inventories as of March 31, 2016, adjusted as follows, based on third-party appraiser estimates, using the following methods:

 

  i. Finished goods at estimated selling prices less the sum of selling costs and a reasonable profit margin for the selling effort of a market participant;

 

  ii. Work in process at estimated selling prices of finished goods less the sum of costs to complete, selling costs, and a reasonable profit margin for the completing and selling effort of a market participant based on profit for similar finished goods; and

 

  iii. Raw materials at current replacement costs.

Teva’s assumptions as to the fair value adjustment of Actavis Generics’ inventories may change as it conducts, with full access to Allergan’s detailed data and the assistance of a third-party appraiser, a valuation of Actavis Generics’ inventories following the completion of the acquisition. There can be no assurance that these changes will not be material.

Teva will reflect the fair value adjustment of Actavis Generics’ inventories in its statements of operations as the acquired inventory is sold, which for purposes of the unaudited pro forma financial statements is assumed to occur within the first year after closing.

 

e. Teva has assumed that the net book value of Actavis Generics’ historical property, plant and equipment (“PP&E”) approximates fair value of these assets for purposes of these unaudited pro forma financial statements. Teva’s assumptions as to the fair value adjustment of Actavis Generics’ PP&E may change as it conducts, with access to Allergan’s detailed data and the assistance of a third-party appraiser, a valuation of Actavis Generics’ PP&E following the completion of the acquisition. There can be no assurance that these changes will not be material.

Based on estimated useful lives averaging approximately 40 years for buildings, for each $40 million change in the total fair value adjustment there could be an annual change in depreciation expense of approximately $1 million.

Based on estimated useful lives averaging approximately between 15 and 20 years for machinery and equipment, for each $20 million change in the total fair value adjustment there could be an annual change in depreciation expense of approximately between $1 and $1.3 million.

 

f. Reflects the elimination of the historical book value of Actavis Generics’ identifiable intangible assets of $2.6 billion as well as the corresponding deferred tax liabilities of $359 million, and the recognition of the estimated fair value adjustment for identifiable intangible assets of $20.0 billion which is preliminary and will be finally determined, with access to Allergan’s detailed data and the assistance of a third-party appraiser, based on the assumptions that market participants would use in pricing an asset. An adjustment has been made to intangible assets acquired, primarily consisting of product rights and in-process research and development (“IPR&D”). Amortization related to the fair value of the finite-lived intangible assets has been reflected as pro forma adjustments to the unaudited pro forma statements of operations.

Teva’s assumptions as to the fair value of Actavis Generics’ identifiable intangible assets and the estimated amortization periods are based on publicly available information as well as limited information provided by Allergan’s management (including Actavis Generics’ abbreviated special purpose combined financial statements, information on Actavis Generics’ patents, analyst reports and investor presentations) and these assumptions will likely change as Teva finalizes the valuation of Actavis Generics’ identifiable intangible assets following the completion of the acquisition.

The fair value adjustment estimate of identifiable intangible assets is preliminary and is determined using the “income approach,” which is a valuation technique that calculates an estimate of the fair value of an asset based on market participants’ expectations of the cash flows an asset would generate over its remaining useful life.

 

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The fair value of the identifiable intangible assets and their weighted-average useful lives are as follows:

 

(U.S. $ in millions)    Estimated
fair value
     Estimated
useful life

Product Rights

   $ 15,855       10

In-process research and development

     4,161       N/A
  

 

 

    
   $ 20,016      
  

 

 

    

Acquired IPR&D assets are initially recognized at fair value and are classified as indefinite-lived assets until the successful completion or abandonment of the associated research and development efforts. Accordingly, during the development period after the date of the acquisition of Actavis Generics, these assets will not be amortized into earnings. Instead, they will be subject to periodic impairment testing. Upon successful completion of the development process for an acquired IPR&D project, a determination as to the useful life of the asset will be made. At that point in time, the asset would then be considered a finite-lived intangible asset and amortization of the asset into earnings would commence. The impact on earnings can be significant. If an IPR&D project was not successfully developed, it may result in an impairment charge.

For every $250 million change in the preliminary fair value estimate of amortizable intangible assets, the annual amortization expense would change by approximately $25 million, depending on the specific intangible asset. An increase of one year in the estimated amortization period would result in a decrease of approximately $145 million in annual amortization expense and a decrease of one year in the estimated amortization period would result in an increase of approximately $176 million in annual amortization expense.

 

g. Reflects the elimination of the historical goodwill amount of $3.7 billion and the recognition of goodwill amount of $18.9 billion related to the acquisition of Actavis Generics. Goodwill is calculated as the difference between the fair value of the consideration expected to be transferred, and the values assigned to the identifiable tangible and intangible assets acquired and liabilities assumed. The estimated goodwill calculation is preliminary and is subject to change based upon final determination of the fair value of assets acquired and liabilities assumed and final determination of the purchase price. Goodwill is not amortized, but is assessed at least annually or more frequently if events or changes in circumstances indicate that the carrying value of goodwill may not be recoverable based on management’s assessment.

 

h. Reflects a deferred income tax liability adjustment of $7.1 billion, resulting mainly from fair value adjustments for the inventory and identifiable intangible assets acquired. This estimate was determined based on the excess book basis over the tax basis of the inventory and identifiable intangible assets acquired, using a weighted average statutory tax rate of approximately 34% based on estimated geographical mix of income and estimated tax rates of Teva following the completion of the acquisition.

Teva’s effective tax rate following the completion of the acquisition could be significantly different depending on various factors.

For purposes of the unaudited pro forma financial statements, no adjustment has been made to the balance of unrecognized tax benefits.

This estimate of deferred income tax liabilities is preliminary and is subject to change based upon Teva’s final determination of the tax rate and the fair values of tangible and identifiable intangible assets acquired and liabilities assumed.

 

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The effect of deferred taxes was estimated as follows:

 

(U.S. $ in millions)       

Deferred income tax impact due to:

  

Estimated fair value for inventory step-up

   $ (260

Estimated fair value for intangible assets

     (6,856

Elimination of historical deferred tax on intangible assets

     359   
  

 

 

 

Estimated adjustments to deferred income taxes

     (6,757

Actavis Generics historical deferred tax liabilities, net

     (69
  

 

 

 

Estimated deferred income tax liabilities, net

   $ (6,826 ) 
  

 

 

 

Consists of:

  

Deferred income tax assets—current

   $ —     

Deferred income tax assets—non-current

     242   

Deferred income tax liabilities—current

     (260

Deferred income tax liabilities—non-current

     (6,808
  

 

 

 

Estimated deferred income tax liabilities, net

   $ (6,826 ) 
  

 

 

 

 

i. Reflects the estimated impact on the unaudited pro forma balance sheet of the divestiture of part of the Actavis Generics’ business in the U.K. and Ireland, which Teva is required to sell due to regulatory requirements. The fair value of the business is estimated at $1.3 billion recorded as assets held for sale under other current assets.

 

j. Reflects the estimated impact on the unaudited pro forma balance sheet of the divestiture of Teva and Actavis Generics products in the U.S. market which Teva is required to sell due to regulatory requirements. The estimated fair value of the divested products in the U.S. market amounts to $1.8 billion and is recorded as assets held for sale under other current assets, of which approximately half of the amount represents Teva products and the rest Actavis Generics’ products. As for the Teva divested products, a tax liability of $0.3 billion is recorded in respect of the excess of the fair value over the net book value. The results of this transaction have no continuing impact on the combined operating results and, as such, they are not included in the unaudited pro forma statements of operations. The fair value of other divested products (outside the U.S., U.K. and Ireland markets) is expected to be immaterial and accordingly is not reflected in the unaudited pro forma balance sheet.

 

5. Actavis Generics Unaudited Pro Forma Statements of Operations Adjustments

The following summarizes the pro forma adjustments in the accompanying unaudited pro forma statements of operations in connection with the acquisition of Actavis Generics to give effect to the acquisition as if it had occurred on January 1, 2015 for purposes of the unaudited pro forma statements of operations:

 

a. An increase in amortization expense associated with fair value adjustments to the carrying value of intangible assets for the three months ended March 31, 2016 and the year ended December 31, 2015. The increase in amortization expense is recorded as follows:

 

(U.S. $ in millions)    Estimated
fair value
     Amortization
three months ended
March 31, 2016
     Amortization
year ended
December 31, 2015
 

Estimated Amortization

   $ 20,016       $ 431       $ 1,720   

Less: Historical Amortization Expenses of Actavis Generics

        122         559   
     

 

 

    

 

 

 
      $ 309       $ 1,161   
     

 

 

    

 

 

 

 

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b. The unaudited pro forma statements of operations does not include a charge related to the inventory fair value adjustment of Actavis Generics’ inventories, as the sale of the acquired inventories is expected to occur within the first year following the acquisition and there is no continuing impact on Teva’s results of operations. The inventory fair value adjustments recorded to cost of sales for prior acquisitions made by Actavis Generics in its abbreviated special purpose combined statements of revenues and direct expenses in the amount of $41 million for the year ended December 31, 2015 have been reversed, as, for the purpose of the unaudited pro forma statements of operations, such adjustments have no continuing impact on Teva’s results of operations after January 1, 2015.

 

c. To reflect elimination of product sales and cost of goods of $6 million and $23 million for the three months ended March 31, 2016 and for the year ended December 31, 2015, respectively, between Teva and Actavis Generics.

 

d. To reflect the estimated impact on sales of divestiture of products (following regulatory requirements in the relevant markets) of $290 million and $1.1 billion for the three months ended March 31, 2016 and for the year ended December 31, 2015, respectively. In addition, the impact of corresponding cost of goods of $114 million and $428 million for the three months ended March 31, 2016 and for the year ended December 31, 2015, respectively, was reflected.

The impact of the results of the divested Actavis Generics’ business in the U.K. and Ireland was also reflected under operating expenses.

Teva’s assumptions as to the impact of products required to be divested and proceeds from such divestiture are based in certain cases on agreements with the specific buyers where agreed to and in other cases solely on management’s assessments. These assumptions may change following the completion of the acquisition based on market conditions and final agreements to sell the specific products. The impact of any gain from these divestitures is not presented in the unaudited pro forma statements of operations as there is no continuing impact on Teva’s results of operations.

 

e. The acquisition-related costs recorded to general and administrative expenses for prior acquisitions made by Actavis Generics in its abbreviated special purpose combined statements of revenues and direct expenses in the amount of $97 million for the year ended December 31, 2015 have been reversed, as, for the purpose of the unaudited pro forma statements of operations, such adjustments have no continuing impact on Teva’s results of operations.

 

f. Adjustment to exclude $13 million and $53 million of acquisition-related transaction costs expensed by Teva in the three months ended March 31, 2016 and the year ended December 31, 2015, respectively. These costs have been reversed, as, for the purpose of the unaudited pro forma statements of operations, they have no continuing impact on Teva’s results of operations.

 

g. Adjustments to record tax expense on income before taxes as presented in the abbreviated special purpose combined statement of revenues and direct expenses as well as to record the tax effect to the pro forma adjustments.

Since the abbreviated special purpose combined financial statements of Actavis Generics did not include income taxes, for purposes of this unaudited pro forma statements of operations Teva used an estimated tax rate of 34% for calculating the tax effect on income (loss) before taxes of Actavis Generics. Refer to note 4h.

The total effective tax rate of Teva after completion of the acquisition could be significantly different depending on various factors.

 

h. The unaudited pro forma combined basic and diluted earnings per share for the periods presented have been adjusted by the number of Teva ordinary shares to be issued to Allergan in connection with the acquisition, included in the pro forma adjustments (refer to notes 3 and 7 for the computation)

 

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6. Financing Adjustments

The total consideration to Allergan will consist of $33.5 billion in cash and approximately 100 million Teva ordinary shares, which represent $4.8 billion in value based on Teva’s closing share price on July 6, 2016.

On December 8, 2015, Teva issued 54 million ADSs at $62.50 per ADS and 3,375,000 of its 7.00% mandatory convertible preferred shares at $1,000 per share. In addition, on January 6, 2016, Teva issued an additional 5.4 million ADSs and 337,500 mandatory convertible preferred shares pursuant to the exercise of the underwriters’ over-allotment option. The total net proceeds from these offerings of approximately $7.24 billion will be used to finance a portion of the cash consideration payable in connection with the Actavis Generics acquisition.

 

  a. The adjustment to cash is as follows:

 

(U.S. $ in millions)    Note         

Bridge facility

     6b       $ 22,000   

Term facilities

     6b         5,000   

Revolving line of credit

     6b         667   
     

 

 

 
      $ 27,667   

Debt issuance costs

     6c         80   
     

 

 

 

Total Financing

      $ 27,587   
     

 

 

 

 

  b. As described in this prospectus supplement, Teva expects to finance the $33.5 billion cash consideration for the Actavis Generics acquisition, together with related fees and expenses, with the net proceeds of the notes offered hereby, together with the net proceeds of our anticipated Euro senior notes offering and CHF senior notes offering, cash on hand (including the proceeds of Teva’s offerings of ADSs and mandatory convertible preferred shares in December 2015), borrowings under its new term loan facility and additional borrowings under our short-term credit facilities. However, these unaudited pro forma financial statements reflect borrowings under the bridge facility, the term facilities and revolving line of credit, which represent financing available as of the time of this filing. For the purpose of the unaudited pro forma financial statements, Teva has assumed a drawdown of $22 billion, $5 billion and approximately $0.7 billion on the bridge facility, term facilities and revolving line of credit, respectively.

On September 25, 2015, Teva entered into a $27 billion bridge facility, which was amended to $22 billion on November 16, 2015. The bridge facility initially matures on the earlier of (i) twelve months from the first utilization under the bridge facility agreement or (ii) 24 months following the signing date of the commitment letter, which we refer to as the initial maturity date. If, on the initial maturity date, any loans under the bridge facility are still outstanding and no default or event of default (in each case as defined in the bridge facility agreement) is then continuing, the borrower has the option, subject to the payment of an extension fee, to extend the maturity of the then outstanding loans under the bridge facility, which date we refer to as the first extension date, until the date that is six months from the first extension date, which date we refer to as the first extension maturity date. If, on the first extension maturity date, any loans under the bridge facility are still outstanding and no default or event of default is then continuing, the borrower has the option to extend the maturity of the then outstanding loans under the bridge facility, which date we refer to as the second extension date, until the date that is six months from the second extension date.

On November 16, 2015, Teva entered into $5 billion term facilities with a syndicate of banks. The term facilities provide for two tranches of term loans. The first tranche of $2.5 billion has a maturity date of three years with the total balance due on maturity. The second tranche of $2.5 billion has a maturity date of five years. Principal installments of $250 million, $250 million, $500 million and $500 million

 

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under this second tranche will be due and payable on the first, second, third and fourth anniversaries, respectively of the funding of the term loan agreement, with remaining $1 billion balance due at maturity.

On November 16, 2015, Teva entered into a $4.5 billion senior unsecured revolving credit agreement with a syndicate of banks. Under the revolving credit agreement, loans and letters of credit will be available from time to time for approximately five years from the signing date for general corporate purposes, including permitted acquisitions.

 

  c. Represents capitalized deferred financing costs assumed of $80 million related to the current bridge facility, term facilities and revolving line of credit in place for Teva’s new borrowings to fund the acquisition. With respect to the bridge facility and the revolving line of credit, an amount of $33 million of withdrawal fee and $2.5 million of upsize fee, respectively, remain to be paid as of March 31, 2016. In addition, Teva has expensed deferred financing costs of $6 million and $19 million for the three months ended March 31, 2016 and for the year ended December 31, 2015, respectively. Since there is no continuing impact of these costs on the combined operating results, they are excluded in the unaudited pro forma statement of operations.

 

  d. Represents the bridge facility of $22 billion, current maturity of the term facilities of $250 million and withdrawal of $0.7 billion from the revolving line of credit.

 

  e. Represents the long-term maturity of the term facilities of $4.8 billion.

 

  f. The pro forma adjustment to financing expenses is approximately $118 million and $389 million for the three months ended March 31, 2016 and for the year ended December 31, 2015, respectively, reflecting an annual weighted average rate of approximately 1.7060% and 1.4060% for the three months ended March 31, 2016 and the year ended December 31, 2015, respectively.

For purposes of the unaudited pro forma statements of operations, Teva has assumed that the amounts outstanding under the bridge facility will bear interest of LIBOR, plus an estimated margin ranging from 40 to 100 basis points. For the term facilities, Teva has assumed the first tranche of $2.5 billion will bear interest of LIBOR plus a margin of 1.125%, and the second tranche of $2.5 billion will bear interest of LIBOR plus a margin of 1.125% (offset by the applicable commitment fee) based on Teva’s credit rating from time to time.

 

  g. The estimated debt and interest expense reflected in the unaudited pro forma financial statements may change and the change could be material. A change of 0.125% in the interest rate would result in an increase or decrease in the pro forma interest expense of approximately $8 million and $34 million for the three months ended March 31, 2016 and for the year ended December 31, 2015, respectively.

 

  i. An estimated tax rate of 20% was applied to the financing adjustments. Teva’s tax rate following the completion of the acquisition could be significantly different depending on various factors.

The fees Teva will ultimately pay and the level of net debt expected to be incurred could vary significantly from what is assumed in the unaudited pro forma financial statements. Variances could arise from multiple factors including: other acquisitions Teva may pursue, the amount of cash on hand at the time of the closing of the acquisition, actual timing and amount of borrowings and repayments under the bridge facility, the actual mix of permanent debt and equity financing, Teva’s credit rating, permanent debt maturities, actual interest rates, actual financial debt instruments and actual fixed or floating mix of permanent debt financing.

 

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7. Unaudited Pro Forma per Share Information

The following table sets forth selected historical share information of Teva and unaudited pro forma share information of Teva after giving effect to the acquisition of Actavis Generics:

 

     Three months ended
March 31, 2016
     Year ended
December 31, 2015
 
     Historical      Pro Forma      Historical      Pro Forma  

Earnings per ordinary share attributable to Teva ordinary shareholders:

           

Basic

   $ 0.62       $ 0.23       $ 1.84       $ 0.79   

Diluted

   $ 0.62       $ 0.23       $ 1.82       $ 0.79   

Weighted average ordinary shares outstanding (in millions):

           

Basic

     913         1,013         855         955   

Diluted

     920         1,020         864         964   

 

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DESCRIPTION OF THE NOTES AND THE GUARANTEES

Teva Finance will issue the notes under a senior indenture, as supplemented by a supplemental indenture, each to be dated as of July 21, 2016, by and among Teva Finance, Teva and The Bank of New York Mellon, as trustee. The terms of the notes include those provided in the indenture. Teva will irrevocably and unconditionally guarantee the punctual payment by Teva Finance of the principal of and premium and interest, if any, on the notes of each series and all other amounts due and payable under the senior indenture.

The following description is only a summary of the material provisions of the notes and the related indentures and guarantees. We urge you to read these documents in their entirety because they, and not this description, define your rights as holders of the notes. You may request copies of these documents at our address set forth in the section titled “Incorporation of Certain Documents by Reference.”

When we refer to Teva in this section, we refer only to Teva Pharmaceutical Industries Limited, an Israeli corporation. When we refer to Teva Finance or the issuer, we refer to Teva Pharmaceutical Finance Netherlands III B.V., an indirect, wholly-owned subsidiary of Teva organized as a Dutch private limited liability company.

We refer to the senior indenture referenced in the first paragraph of this section, as supplemented, as the “indenture;” and we refer to the 2018 notes, the 2019 notes, the 2021 notes, the 2023 notes, the 2026 notes and the 2046 notes, collectively, as the “notes.”

Brief Description of the Notes

The notes will:

 

    initially be limited to:

 

    $1,500,000,000 aggregate principal amount of the 2018 notes;

 

    $2,000,000,000 aggregate principal amount of the 2019 notes;

 

    $3,000,000,000 aggregate principal amount of the 2021 notes;

 

    $3,000,000,000 aggregate principal amount of the 2023 notes;

 

    $3,500,000,000 aggregate principal amount of the 2026 notes; and

 

    $2,000,000,000 aggregate principal amount of the 2046 notes;

subject to reopening of the notes at the discretion of Teva Finance;

 

    accrue interest:

 

    at a rate of 1.400% on the 2018 notes, payable semi-annually in arrears on January 20 and July 20 of each year, beginning January 20, 2017, to the holders of record at the close of business on the preceding January 5 and July 5, respectively, whether or not a Business Day (as defined below);

 

    at a rate of 1.700% on the 2019 notes, payable semi-annually in arrears on January 19 and July 19 of each year, beginning January 19, 2017, to the holders of record at the close of business on the preceding January 4 and July 4, respectively, whether or not a Business Day;

 

    at a rate of 2.200% on the 2021 notes and a rate of 2.800% on the 2023 notes, payable semi-annually in arrears on January 21 and July 21 of each year, beginning January 21, 2017, to the holders of record at the close of business on the preceding January 6 and July 6, respectively, whether or not a Business Day; and

 

    at a rate of 3.150% on the 2026 notes and a rate of 4.100% on the 2046 notes, payable semi-annually in arrears on April 1 and October 1 of each year, beginning April 1, 2017, to the holders of record at the close of business on the preceding March 15 and September 15, respectively, whether or not a Business Day;

 

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    constitute general unsecured obligations of Teva Finance;

 

    be redeemable at the option of Teva Finance at any time at the greater of (1) 100% of the principal amount of the notes to be redeemed or (2) the sum of the present values of the Remaining Scheduled Payments (as defined below) discounted, on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months), at a rate equal to the sum of the Treasury Rate (as defined below) plus 12.5 basis points, in the case of the 2018 notes, 15 basis points, in the case of the 2019 notes, 20 basis points, in the case of the 2021 notes, 25 basis points, in the case of the 2023 notes, 25 basis points, in the case of the 2026 notes, or 30 basis points, in the case of the 2046 notes, plus accrued and unpaid interest, if any, to, but excluding, the date of redemption (in addition to being redeemable as set forth below under “—Tax Redemption”); and

 

    be due on:

 

    July 20, 2018, in the case of the 2018 notes;

 

    July 19, 2019, in the case of the 2019 notes;

 

    July 21, 2021, in the case of the 2021 notes;

 

    July 21, 2023, in the case of the 2023 notes;

 

    October 1, 2026, in the case of the 2026 notes; and

 

    October 1, 2046, in the case of the 2046 notes;

in each case, unless earlier redeemed by Teva Finance.

The indenture does not contain any financial covenants or restrictions on the amount of additional indebtedness that Teva, Teva Finance or any of Teva’s other subsidiaries may incur except as described in “—Certain Covenants” below. The indenture does not protect you in the event of a highly leveraged transaction or change of control of Teva or Teva Finance. The notes do not contain any sinking fund provisions.

Teva Finance may, without the consent of the holders, issue additional notes of any series under the indenture with the same terms and with the same CUSIP number as the notes of such series offered hereby in an unlimited aggregate principal amount; provided that such notes must be part of the same issue as the notes of such series offered hereby for U.S. federal income tax purposes. We may also from time to time repurchase notes in open market purchases or negotiated transactions without giving prior notice to holders.

You may present definitive registered notes for registration of transfer and exchange, without service charge, at our office or agency in New York City, which shall initially be the office or agency of the trustee in New York City. For information regarding registration of transfer and exchange of global registered notes, see “—Form, Denomination and Registration” below.

Description of the Guarantees

Teva will irrevocably and unconditionally guarantee the punctual payment when due, whether at maturity, upon redemption, by acceleration or otherwise, of the principal of and premium and interest (including any additional amounts in respect of taxes as provided herein), if any, on the notes of each series as well as all other amounts due and payable under the senior indenture. The respective guarantees will be enforceable by the trustee, the holders of the applicable notes and their successors, transferees and assigns.

Each guarantee will be an unsecured senior obligation of Teva. As indebtedness of Teva, after giving effect to the offerings contemplated hereby, each guarantee will rank:

 

    senior to the rights of creditors under indebtedness expressly subordinated to the guarantee (at March 31, 2016, Teva had no subordinated indebtedness outstanding);

 

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    equally with other unsecured indebtedness of Teva from time to time outstanding other than any that is subordinated to the guarantee (at March 31, 2016, Teva had approximately $10.2 billion of senior unsecured indebtedness outstanding, which does not include the additional $28 billion of indebtedness Teva expects to incur in connection with the Actavis Generics closing);

 

    effectively junior to Teva’s secured indebtedness up to the value of the collateral securing that indebtedness (at March 31, 2016, Teva had no secured indebtedness outstanding); and

 

    effectively junior to the indebtedness and other liabilities of Teva’s subsidiaries (at March 31, 2016, Teva’s subsidiaries, other than finance subsidiaries, had approximately $1.3 billion of indebtedness outstanding).

Except as described in “—Certain Covenants” below, the indenture does not contain any financial covenants or restrictions on the amount of additional indebtedness that Teva, Teva Finance or any of Teva’s other subsidiaries may incur.

Payment of Interest and Principal

Interest on the Notes

The 2018 notes will bear interest at the rate of 1.400% per year, payable semi-annually in arrears on January 20 and July 20 of each year, beginning January 20, 2017, to the holders of record at the close of business on the preceding January 5 and July 5, respectively, whether or not a Business Day (as defined below). The 2019 notes will bear interest at the rate of 1.700% per year, payable semi-annually in arrears on January 19 and July 19 of each year, beginning January 19, 2017, to the holders of record at the close of business on the preceding January 4 and July 4, respectively, whether or not a Business Day. The 2021 notes and the 2023 notes will bear interest at the rate of 2.200% per year and 2.800% per year, respectively, payable semi-annually in arrears on January 21 and July 21 of each year, beginning January 21, 2017, to the holders of record at the close of business on the preceding January 6 and July 6, respectively, whether or not a Business Day. The 2026 notes and the 2046 notes will bear interest at the rate of 3.150% per year and 4.100% per year, respectively, payable semi-annually in arrears on April 1 and October 1 of each year, beginning April 1, 2017, to the holders of record at the close of business on the preceding March 15 and September 15, respectively, whether or not a Business Day. If an interest payment date for the notes falls on a day that is not a Business Day, interest will be payable on the next succeeding Business Day with the same force and effect as if made on such interest payment date. Interest on the notes will be computed on the basis of a 360-day year comprised of twelve 30-day months, and will accrue from July 21, 2016, or from the most recent interest payment date to which interest has been paid.

“Business Day” means a day other than (i) a Saturday or Sunday, (ii) a day on which banks in New York, New York are authorized or obligated by law or executive order to remain closed or (iii) a day on which the trustee’s corporate trust office is closed for business.

Mechanics of Payment

Except as provided below, Teva Finance will pay interest on:

 

    the global registered notes to DTC in immediately available funds;

 

    any definitive registered notes having an aggregate principal amount of $5,000,000 or less by check mailed to the holders of these notes; and

 

    any definitive registered notes having an aggregate principal amount of more than $5,000,000 by wire transfer in immediately available funds at the election of the holders of these notes.

At maturity, Teva Finance will pay interest on the definitive registered notes at our office or agency in New York City, which initially will be the office or agency of the trustee in New York City.

 

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Teva Finance will pay principal and premium, if any, on:

 

    the global registered notes to DTC in immediately available funds; and

 

    any definitive registered notes at our office or agency in New York City, which initially will be the office or agency of the trustee in New York City.

Reference to payments of interest in this section, unless the context otherwise requires, refer to the payment of interest and additional amounts in respect to taxes, if any.

Optional Redemption by the Issuer

Teva Finance may redeem the notes, in whole or in part, at any time or from time to time, on at least 20 days’, but not more than 60 days’, prior notice mailed to the registered address of each holder of the relevant notes, with a copy of such notice mailed to the trustee. The redemption prices will be equal to the greater of (1) 100% of the principal amount of the notes to be redeemed or (2) the sum of the present values of the Remaining Scheduled Payments (as defined below) discounted, on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months), at a rate equal to the sum of the Treasury Rate (as defined below) plus 12.5 basis points, in the case of the 2018 notes, 15 basis points, in the case of the 2019 notes, 20 basis points, in the case of the 2021 notes, 25 basis points, in the case of the 2023 notes, 25 basis points, in the case of the 2026 notes or 30 basis points, in the case of the 2046 notes, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

“Comparable Treasury Issue” means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term of the notes to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining term of the relevant notes.

“Comparable Treasury Price” means, with respect to any redemption date, (1) the average of the Reference Treasury Dealer Quotations for such redemption date after excluding the highest and lowest of such Reference Treasury Dealer Quotations or (2) if the Independent Investment Banker obtains fewer than five such Reference Treasury Dealer Quotations, the average of all such quotations.

“Independent Investment Banker” means one of the Reference Treasury Dealers appointed by us.

“Reference Treasury Dealer” means each of Barclays Capital Inc., BNP Paribas Securities Corp., Credit Suisse Securities (USA) LLC, HSBC Securities (USA) Inc., Merrill Lynch, Pierce Fenner & Smith Incorporated and Mizuho Securities USA Inc. and their respective successors. If any of the foregoing shall cease to be a Primary Treasury Dealer, we will substitute another nationally recognized investment banking firm that is a Primary Treasury Dealer.

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Independent Investment Banker, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Independent Investment Banker by such Reference Treasury Dealer at 3:30 p.m., New York City time, on the third Business Day preceding such redemption date.

“Remaining Scheduled Payments” means, with respect to each note to be redeemed, the remaining scheduled payments of principal of and interest on such note that would be due after the related redemption date but for such redemption. If such redemption date is not an interest payment date with respect to such note, the amount of the next succeeding scheduled interest payment on such note will be reduced by the amount of interest accrued on such note to such redemption date.

 

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“Treasury Rate” means, with respect to any redemption date, the rate per year equal to the semi-annual equivalent yield to maturity (computed as of the second Business Day immediately preceding such redemption date) of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

On and after the redemption date, interest will cease to accrue on the relevant notes or any portion of such notes as is called for redemption (unless we default in the payment of the redemption price and accrued interest). On the Business Day before the redemption date, we will deposit with a paying agent (or the trustee) money sufficient to pay the redemption price of and accrued interest on the notes to be redeemed on such date. If less than all of the relevant notes are to be redeemed, the notes to be redeemed shall be selected by the trustee on a pro rata basis, by lot or by such method as the trustee shall deem fair and appropriate and subject to the rules of the applicable depositary.

The terms of the notes do not prevent Teva or Teva Finance from purchasing notes on the open market.

Special Mandatory Redemption

If the closing of the Actavis Generics acquisition does not occur on or prior to October 26, 2016, or if the Master Purchase Agreement is terminated at any time prior thereto, we will be required to redeem the notes on the special redemption date (as defined below) at a redemption price equal to 101% of their aggregate principal amount (the “special redemption price”), plus accrued and unpaid interest, if any, from the date of initial issuance of the notes up to, but not including, the special redemption date.

The “special redemption date” means the date fixed for any special mandatory redemption in a special mandatory redemption notice (as defined below).

Teva Finance will cause the notice of the event (the “special mandatory redemption notice”) to be mailed, with a copy to the trustee, to each holder of notes being redeemed at its registered address within five Business Days after the occurrence of the event triggering the special mandatory redemption. If funds sufficient to pay the special redemption price of all notes on the special redemption date are deposited with the trustee on or before such special redemption date, plus accrued and unpaid interest, if any, to, but not including, the special redemption date, the notes will cease to bear interest and all rights under the notes shall terminate (other than in respect of the right to receive the special redemption price, plus accrued and unpaid interest, if any). The special mandatory redemption notice will specify the special redemption date, which date may not be any later than the 25th day (or, if such day is not a Business Day, the first Business Day thereafter) from the date of such special mandatory redemption notice. The provisions related to our obligation to redeem the notes in a special mandatory redemption may not be waived or modified for any series of the notes without the written consent of holders of at least a majority in principal amount of the series of notes subject to such waiver or modification.

Notwithstanding the foregoing, installments of interest on any series of notes that are due and payable on interest payment dates falling on or prior to the special redemption date will be payable on such interest payment dates to the registered holders as of the close of business on the relevant record dates in accordance with the notes and the indenture.

Upon the occurrence of the closing of the Actavis Generics acquisition, the foregoing provisions regarding the special mandatory redemption will cease to apply.

Certain Covenants

Limitations on Secured Debt. If Teva or any of its subsidiaries creates, incurs, assumes or suffers to exist any lien on any of its property (including a subsidiary’s stock or debt) to secure other debt, Teva will secure the notes on the same basis for so long as such other debt is so secured, unless, after giving effect to such lien, the

 

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aggregate amount of the secured debt then outstanding (not including debt secured by liens permitted below) plus the value of all sale and leaseback transactions described in paragraph (3) of “—Limitations on Sales and Leasebacks” below would not exceed 10% of Teva’s consolidated net worth. The restrictions do not apply to the following liens:

 

    liens existing as of the date when Teva Finance first issues notes pursuant to the indenture;

 

    liens on property created prior to, at the time of or within 120 days after the date of acquisition, completion of construction or completion of improvement of such property to secure all or part of the cost of acquiring, constructing or improving all or any part of such property;

 

    landlord’s, material men’s, carriers’, workmen’s, repairmen’s or other like liens arising in the ordinary course of business in respect of obligations which are not overdue or which are being contested in good faith in appropriate proceedings;

 

    liens existing on any property of a corporation or other entity at the time it became or becomes a subsidiary of Teva (provided that the lien has not been created or assumed in contemplation of that corporation or other entity becoming a subsidiary of Teva);

 

    liens securing debt owing by a subsidiary to Teva or to one or more of its subsidiaries;

 

    liens in favor of any governmental authority of any jurisdiction securing the obligation of Teva or any of its subsidiaries pursuant to any contract or payment owed to that entity pursuant to applicable laws, regulations or statutes; and

 

    any extension, renewal, substitution or replacement of the foregoing, provided that the principal amount is not increased and that such lien is not extended to other property.

Limitations on Sales and Leasebacks. Teva will not, and will not permit any subsidiary to, enter into any sale and leaseback transaction covering any property after the date when Teva Finance first issues notes pursuant to the indenture unless:

 

  1. the sale and leaseback transaction:

 

  A. involves a lease for a period, including renewals, of not more than five years;

 

  B. occurs within 270 days after the date of acquisition, completion of construction or completion of improvement of such property; or

 

  C. is with Teva or one of its subsidiaries; or

 

2. Teva or any subsidiary, within 270 days after the sale and leaseback transaction shall have occurred, applies or causes to be applied an amount equal to the value of the property so sold and leased back at the time of entering into such arrangement to the prepayment, repayment, redemption, reduction or retirement of any indebtedness of Teva or any subsidiary that is not subordinated to the notes and that has a stated maturity of more than twelve months; or

 

3. Teva or any subsidiary would be entitled pursuant to the exceptions under “—Limitations on Secured Debt” above to create, incur, issue or assume indebtedness secured by a lien in the property without equally and ratably securing the notes.

Certain Other Covenants

The indenture will contain certain other covenants regarding, among other matters, corporate existence and reports to holders of notes.

 

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Additional Tax Amounts

Neither Teva Finance, as the issuer, nor Teva, as the guarantor, will withhold or deduct from payments made with respect to the notes of any series on account of any present or future taxes, duties, assessments or governmental charges imposed by or on behalf of any Taxing Jurisdiction taxing authority unless such withholding or deduction is required by law. The term “Taxing Jurisdiction” as used herein means with respect to the notes, The Netherlands, Israel or any jurisdiction where a successor to Teva Finance or Teva is incorporated or organized or considered to be a resident, if other than The Netherlands or Israel, respectively, or any jurisdiction through which payments will be made.

“Taxes” means, with respect to payments on the notes, all taxes, withholdings, duties, assessments or governmental charges of whatever nature imposed or levied by or on behalf of any Taxing Jurisdiction or any political subdivision thereof or any authority or agency therein or thereof having power to tax.

In the event that Teva Finance or Teva is required to withhold or deduct on account of any such Taxes from any payment made under or with respect to the notes, that Teva Finance or Teva, as the case may be, will:

 

    withhold or deduct such amounts;

 

    pay such additional tax amounts so that the net amount received by each holder or beneficial owner of the relevant notes, including those additional tax amounts, will equal the amount that such holder or beneficial owner would have received if such Taxes had not been required to be withheld or deducted; and

 

    pay the full amount withheld or deducted to the relevant tax or other authority in accordance with applicable law,

except that no such additional amounts will be payable in respect of any note:

 

  1. to the extent that such Taxes are imposed or levied by reason of such holder (or the beneficial owner) having some present or former connection with the Taxing Jurisdiction other than the mere holding (or beneficial ownership) of such note or receiving principal or interest payments on the notes (including but not limited to citizenship, nationality, residence, domicile, or the existence of a business, permanent establishment, a dependant agent, a place of business or a place of management present or deemed present in the Taxing Jurisdiction);

 

  2. in respect of any Taxes that would not have been so withheld or deducted but for the failure by the holder or the beneficial owner of the notes to make a declaration of non-residence, or any other claim or filing for exemption to which it is entitled or otherwise comply with any reasonable certification, identification, information, documentation or other reporting requirement concerning nationality, residence, identity or connection with the Taxing Jurisdiction if (a) compliance is required by applicable law, regulation, administrative practice or treaty as a precondition to exemption from all or part of the Taxes, (b) the holder (or beneficial owner) is able to comply with these requirements without undue hardship and (c) we have given the holders (or beneficial owners) at least 30 calendar days prior notice that they will be required to comply with such requirement;

 

  3. to the extent that such Taxes are imposed by reason of any estate, inheritance, gift, sales, transfer or personal property taxes imposed with respect to the notes, except as otherwise provided in the indenture;

 

  4. to the extent that any such Taxes would not have been imposed but for the presentation of such notes, where presentation is required, for payment on a date more than 30 days after the date on which such payment became due and payable or the date on which payment thereof is duly provided for, whichever is later, except to the extent that the holder would have been entitled to additional tax amounts had the notes been presented for payment on any date during such 30-day period;

 

  5.

in respect of any Taxes imposed under Sections 1471-1474 of the Internal Revenue Code of 1986, as amended, any applicable U.S. Treasury Regulations promulgated thereunder, or any judicial or

 

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  administrative interpretations of any of the foregoing (see “—United States Federal Income Tax Considerations—Tax Consequences to Non-U.S. Holders—Additional Withholding Requirements,” relating to the regime commonly known as FATCA); or

 

  6. any combination of items 1 through 5 above.

Teva Finance, as the issuer, and Teva, as the guarantor, will pay any present or future stamp, court or documentary taxes or any other excise or property taxes, charges or similar levies that arise from the execution, delivery, enforcement or registration of the notes of any series or any other document or instrument in relation thereto.

Tax Redemption

The notes of any series may be redeemed as a whole, but not in part, at the option of Teva Finance, Teva or any successor to Teva Finance or Teva, as the case may be, at any time prior to maturity, upon the giving of a notice of tax redemption to the trustee and the holders of the applicable series, if Teva Finance determines that, as a result of:

 

    any change in or amendment to the laws, or any regulations or rulings promulgated under the laws of the Taxing Jurisdiction or any political subdivision or taxing authority of or in the Taxing Jurisdiction affecting taxation, or

 

    any change in official position regarding the application or interpretation of the laws, regulations or rulings referred to above,

which change or amendment becomes effective or, in the case of a change in official position, is announced on or after the issuance of the relevant notes, Teva Finance, Teva or any successor to Teva Finance or Teva, as the case may be, is or will become obligated to pay additional tax amounts with respect to the notes, as described above under “—Additional Tax Amounts;” provided that Teva Finance (or its successor), in its business judgment, determines that such obligation cannot be avoided by Teva Finance, Teva or any successor, as the case may be, taking reasonable measures available to it.

The redemption price will be equal to 100% of the principal amount of the applicable series of notes plus accrued and unpaid interest to the date fixed for redemption. The date and the applicable redemption price will be specified in the notice of tax redemption, which notice will be given not earlier than 90 days prior to the earliest date on which Teva Finance (or its successor) or, as the case may be, Teva (or its successor) would be obligated to pay such additional tax amounts if a payment in respect of the relevant notes were actually due on such date. The notes can be redeemed if, at the time such notice of redemption is given, such obligation to pay such additional tax amounts remains in effect.

Prior to giving the notice of a tax redemption, Teva Finance, Teva or any successor to Teva Finance or Teva, as the case may be, will deliver to the trustee:

 

    a certificate signed by a duly authorized officer stating that Teva Finance, Teva or any successor to Teva Finance or Teva, as the case may be, is entitled to effect the redemption and setting forth a statement of facts showing that the conditions precedent to the right of Teva Finance, Teva or any successor to Teva Finance or Teva, as the case may be, to so redeem have occurred; and

 

    an opinion of independent legal counsel of recognized standing to that effect based on the statement of facts.

Events of Default

Each of the following constitutes an event of default under the indenture with respect to each series of notes:

 

  (1) Teva Finance’s failure to pay when due the principal and premium, if any, of any of the relevant notes issued under the indenture at maturity or upon redemption;

 

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  (2) Teva Finance’s failure to pay an installment of interest (including additional amounts, if any) on any of the relevant notes issued under the indenture for 30 days after the date when due;

 

  (3) Teva’s failure to perform its obligations under its guarantees under the indenture relating to the relevant notes;

 

  (4) except as permitted by the indenture, the related guarantee by Teva shall be held in any final, non-appealable judicial proceeding to be unenforceable or invalid or shall cease for any reason to be in full force and effect or Teva, or any person acting on behalf of the Teva, shall deny or disaffirm its obligations under that guarantee;

 

  (5) Teva’s or Teva Finance’s failure to perform or observe any other term, covenant or agreement contained in the indenture or the relevant notes issued under it for a period of 60 days after written notice of such failure, requiring Teva or Teva Finance, as the case may be, to remedy the same, shall have been given to Teva or Teva Finance, as the case may be, by the trustee or to Teva or Teva Finance, as the case may be, and the trustee by the holders of at least 25% in aggregate principal amount of the relevant notes then outstanding;

 

  (6) Teva’s or Teva Finance’s default under any Indebtedness (as defined below) for money borrowed by it, the aggregate outstanding principal amount of which is in an amount in excess of $250 million, for a period of 30 days after written notice to Teva Finance by the trustee or to Teva Finance and the trustee by holders of at least 25% in aggregate principal amount of the relevant notes then outstanding, which default:

 

    is caused by Teva or Teva Finance’s, as the case may be, failure to pay when due principal or interest on such Indebtedness by the end of the applicable grace period, if any, unless such Indebtedness is discharged; or

 

    results in the acceleration of such Indebtedness, unless such acceleration is waived, cured, rescinded or annulled;

 

  (7) Teva or Teva Finance’s, bankruptcy, insolvency or reorganization; and

 

  (8) Teva’s failure to comply with the provisions described under “—Special Mandatory Redemption.”

The indenture will provide that the trustee shall (other than in the case of (7) above, which shall result in the notes becoming immediately due and payable), within 90 days of the occurrence of a default, give to the registered holders of the notes notice of all uncured defaults known to it, but the trustee shall be protected in withholding such notice if it, in good faith, determines that the withholding of such notice is in the best interest of such registered holders, except in the case of a default in the payment of the principal of or interest on, any of the notes when due or in the payment of any redemption or repurchase obligation.

If an event of default shall occur and be continuing, the trustee or the holders of at least 25% in aggregate principal amount of the notes affected then outstanding may declare the principal amount of the relevant notes due and payable together with accrued interest, and then the trustee may, at its discretion, proceed to protect and enforce the rights of the holders of the notes by appropriate judicial proceedings. Such declaration may be rescinded or annulled with the written consent of the holders of a majority in aggregate principal amount of the relevant notes then outstanding.

The indenture will contain a provision entitling the trustee, subject to the duty of the trustee during default to act with the required standard of care, to be indemnified to its satisfaction by the holders of the notes before proceeding to exercise any right or power under the indenture at the request of such holders. The indenture will provide that the holders of a majority in aggregate principal amount of the notes then outstanding through their written consent, or the holders of a majority in aggregate principal amount of the notes then outstanding represented at a meeting at which a quorum is present by a written resolution, may direct the time, method and place of conducting any proceeding for any remedy available to the trustee or exercising any trust or power conferred upon the trustee.

 

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Teva Finance will be required to furnish annually to the trustee a statement as to the fulfillment of its obligations under the indenture.

“Indebtedness” means, with respect to any person:

 

  (1) any liability for borrowed money, or evidenced by an instrument for the payment of money, or incurred in connection with the acquisition of any property, services or assets (including securities), or relating to a capitalized lease obligation, other than accounts payable or any other indebtedness to trade creditors created or assumed by such person in the ordinary course of business in connection with the obtaining of materials or services;

 

  (2) obligations under exchange rate contracts or interest rate protection agreements;

 

  (3) any obligations to reimburse Teva Finance of any letter of credit, surety bond, performance bond or other guarantee of contractual performance;

 

  (4) any liability of another person of the type referred to in clause (1), (2) or (3) which has been assumed or guaranteed by such person; and

 

  (5) any obligations described in clauses (1) through (3) secured by any mortgage, pledge, lien or other encumbrance existing on property which is owned or held by such person, regardless of whether the indebtedness or other obligation secured thereby shall have been assumed by such person.

Consolidation, Merger or Assumption

Teva Finance may, without the consent of the holders of the notes that it issues, consolidate with, merge into or transfer all or substantially all of its respective assets to any other corporation, limited liability company, partnership or trust organized under the laws of The Netherlands, in the case of Teva Finance, provided that:

 

    the successor entity assumes all of the obligations of Teva Finance under the indenture and the notes that Teva Finance has issued; and

 

    at the time of such transaction, no event of default, and no event which, after notice or lapse of time, would become an event of default, shall have happened and be continuing.

Under the terms of the indenture, Teva may, without the consent of the holders of notes, consolidate with, merge into or transfer all or substantially all of its assets to any other corporation provided that:

 

    the successor corporation assumes all of the obligations of Teva under the indenture and the notes issued pursuant to it; and

 

    at the time of such transaction, no event of default, and no event which, after notice or lapse of time, would become an event of default, shall have happened and be continuing.

The indenture will provide that so long as any notes issued under it are outstanding, all of Teva Finance’s capital stock or membership interests, as applicable, will be owned directly or indirectly by Teva or its successor.

Modifications and Amendments

Changes Requiring Approval of Each Affected Holder

The indenture will provide that it cannot be modified or amended without the written consent or the affirmative vote of the holder of each note affected by such change to:

 

    change the maturity of the principal of or any installment of interest on that note;

 

    reduce the principal amount of or interest on that note;

 

    change the currency of payment of that note or interest thereon;

 

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    impair the right to institute suit for the enforcement of any payment on or with respect to that note;

 

    modify Teva Finance’s obligations to maintain an office or agency in New York City;

 

    modify Teva’s obligation to own, directly or indirectly, all of Teva Finance’s outstanding capital stock or membership interests, as applicable;

 

    modify the redemption provisions of the indenture in a manner adverse to the holders of the notes;

 

    modify the applicable guarantee in a manner adverse to the holders of the notes;

 

    reduce the percentage in aggregate principal amount of outstanding notes necessary to modify or amend the indenture or to waive any past default; or

 

    reduce the percentage in aggregate principal amount of notes outstanding required for the adoption of a resolution.

Changes Requiring Majority Approval

Except as described above, the indenture may be modified or amended with the written consent of the holders of at least a majority in aggregate principal amount of the series of notes affected at the time outstanding.

Changes Requiring No Approval

The indenture or the notes may be modified or amended by Teva Finance, Teva and the trustee, without the consent of the holder of any note of a given series, for the purposes of, among other things:

 

    adding to Teva or Teva Finance’s covenants for the benefit of the holders of the notes;

 

    surrendering any right or power conferred upon Teva or Teva Finance;

 

    providing for the assumption of Teva or Teva Finance’s obligations to the holders of the notes in the case of a merger, consolidation, conveyance, transfer or lease;

 

    complying with the requirements of the SEC in order to effect or maintain the qualification of the indenture under the Trust Indenture Act of 1939, as amended;

 

    curing any ambiguity, supplying any omission or correcting any defective provision contained in the indenture ; provided that such modification or amendment does not, in the good faith opinion of Teva Finance’s managing and supervisory directors, adversely affect the interests of the holders of notes in any material respect; and provided, further, that any amendment made solely to conform the provisions of the indenture to the description of the notes issued under the indenture contained in this prospectus supplement will not be deemed to adversely affect the interests of the holders of the notes; or

 

    adding or modifying any other provisions which Teva Finance or Teva, as the case may be, and the trustee may deem necessary or desirable and which will not adversely affect the interests of the holders of notes.

Satisfaction and Discharge

Teva Finance and Teva may satisfy and discharge their obligations under the indenture while the notes issued under the indenture remain outstanding if:

 

    all outstanding notes issued under the indenture have become due and payable at their scheduled maturity; or

 

    all outstanding notes issued under the indenture have been called for redemption,

and, in either case, Teva Finance has deposited with the trustee an amount sufficient to pay and discharge all outstanding notes issued under the indenture on the date of their scheduled maturity or the scheduled date of redemption, as the case may be.

 

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Governing Law

The indenture and the notes will be governed by, and construed in accordance with, the law of the State of New York.

Information Concerning the Trustee and Paying Agent

The Bank of New York Mellon, as trustee under the indenture, has been appointed by us as paying agent, registrar and custodian with regard to the notes. The trustee or its affiliates may from time to time in the future provide banking and other services to us in the ordinary course of their business. The trustee shall be under no obligation to exercise any of the trusts or powers vested in it by an indenture at the request, order or direction of any of the holders of the notes pursuant to such indenture, unless such holders shall have offered to the trustee security or indemnity satisfactory to it against the costs, expenses and liabilities which might be incurred therein or thereby.

Form, Denomination and Registration

Denomination and Registration. The notes will be issued in fully registered form, without coupons, in denominations of $2,000 principal amount and whole multiples of $1,000 in excess of $2,000.

Global Notes; Book-Entry Form. The notes will be represented by permanent global notes in definitive, fully registered form without interest coupons. The global registered notes will be deposited with the trustee as custodian for DTC and registered in the name of a nominee of DTC in New York, New York for the accounts of participants in DTC.

Except as set forth below, the global registered notes will be transferable, in whole or in part, only to another nominee of DTC or to a successor of DTC or its nominee.

DTC has advised us that it is:

 

    a limited purpose trust company organized under the laws of the State of New York;

 

    a member of the Federal Reserve System;

 

    a “clearing corporation” within the meaning of the New York Uniform Commercial Code; and

 

    a “clearing agency” registered pursuant to the provisions of Section 17A of the Exchange Act.

DTC was created to hold securities of institutions that have accounts with DTC and to facilitate the clearance and settlement of securities transactions among its participants in securities through electronic book-entry changes in accounts of the participants, thereby eliminating the need for physical movement of securities certificates. DTC’s participants include:

 

    securities brokers and dealers;

 

    banks;

 

    trust companies; and

 

    clearing corporations.

Access to DTC’s book-entry system is also available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant whether directly or indirectly.

Upon the issuance of the global registered notes, DTC will credit, on its book-entry registration and transfer system, the respective principal amounts of the individual beneficial interests represented by the global registered

 

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notes to the accounts of participants. The accounts credited will be designated by the underwriters of the beneficial interests. Ownership of beneficial interests in the global registered notes is limited to participants or persons that may hold interests through participants. Ownership of beneficial interests in the global registered notes is shown on, and the transfer of those ownership interests will be effected only through, records maintained by DTC (with respect to participants’ interests) and the participants (with respect to the owners of beneficial interests in the global registered notes other than participants).

So long as DTC or its nominee is the registered holder and owner of the global registered notes, DTC or its nominee, as the case may be, will be considered the sole legal owner of the notes represented by the global registered notes for all purposes under the indenture and the notes. Except as set forth below, owners of beneficial interests in the global registered notes will not be entitled to receive definitive registered notes and will not be considered to be the owners or holders of any notes under the global registered notes. Teva Finance understands that under existing industry practice, in the event an owner of a beneficial interest in the global registered notes desires to take any action that DTC, as the holder of the global registered notes, is entitled to take, DTC would authorize the participants to take the action, and that participants would authorize beneficial owners owning through the participants to take the action or would otherwise act upon the instructions of beneficial owners owning through them. No beneficial owner of an interest in the global registered notes will be able to transfer the interest except in accordance with DTC’s applicable procedures, in addition to those provided for under the indenture and, if applicable, those of Euroclear and Clearstream.

Teva Finance will make payments of the principal and interest on the notes represented by the global registered notes registered in the name of and held by DTC or its nominee to DTC or its nominee, as the case may be, as the registered owner and holder of the global registered notes.

Teva Finance expects that DTC or its nominee, upon receipt of any payment of principal or interest in respect of the global registered notes, will credit participants’ accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of the global registered notes as shown on the records of DTC or its nominee. Teva Finance also expects that payments by participants and indirect participants to owners of beneficial interests in the global registered notes held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for accounts of customers registered in the names of nominees for these customers. The payments, however, will be the responsibility of the participants and indirect participants, and none of Teva Finance, Teva, the trustee or any paying agent will have any responsibility or liability for:

 

    any aspect of the records relating to, or payments made on account of, beneficial ownership interests in the global registered notes;

 

    maintaining, supervising or reviewing any records relating to the beneficial ownership interests;

 

    any other aspect of the relationship between DTC and its participants; or

 

    the relationship between the participants and indirect participants and the owners of beneficial interests in the global registered notes.

Unless and until they are exchanged in whole or in part for definitive registered notes, the global registered notes may not be transferred except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC.

Participants in DTC will effect transfers with other participants in the ordinary way in accordance with DTC rules and will settle transfers in same-day funds. Participants in Euroclear and Clearstream will effect transfers with other participants in the ordinary way in accordance with the rules and operating procedures of Euroclear and Clearstream, as applicable.

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Euroclear or Clearstream, as the case may be, by its respective depositary; however, these cross-market transactions will require delivery of instructions to Euroclear or Clearstream, as the case may be, by the counterparty in the system in accordance with its rules and procedures and within its established deadlines (Brussels time). Euroclear or Clearstream, as the case may be, will, if the transaction meets its settlement requirements, deliver instructions to its respective depositary to take action to effect final settlement on its behalf by delivering or receiving interests in the global registered notes in DTC, and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Euroclear participants and Clearstream participants may not deliver instructions directly to the depositaries for Euroclear or Clearstream.

Because of time zone differences, the securities account of a Euroclear or Clearstream participant purchasing an interest in the global registered notes from a DTC participant will be credited during the securities settlement processing day immediately following the DTC settlement date, and the credit of any transactions interests in the global registered notes settled during the processing day will be reported to the relevant Euroclear or Clearstream participant on that day. Cash received in Euroclear or Clearstream as a result of sales of interests in the global registered notes by or through a Euroclear or Clearstream participant to a DTC participant will be received with value on the DTC settlement date, but will be available in the relevant Euroclear or Clearstream cash account only as of the business day following settlement in DTC.

Teva Finance expects that DTC will take any action permitted to be taken by a holder of notes only at the direction of one or more participants to whose accounts at DTC interests in the global registered notes are credited and only in respect of the portion of the aggregate principal amount of the notes as to which the participant or participants has or have given direction. However, if there is an event of default under the notes, DTC will exchange the global registered notes for definitive registered notes, which it will distribute to its participants.

Although Teva Finance expects that DTC, Euroclear and Clearstream will agree to the foregoing procedures in order to facilitate transfers of interests in the global registered notes among participants of DTC, Euroclear and Clearstream, DTC, Euroclear and Clearstream are under no obligation to perform or continue to perform these procedures, and these procedures may be discontinued at any time. None of Teva Finance, Teva, the trustee or any paying agent have any responsibility for the performance by DTC, Euroclear or Clearstream or their participants or indirect participants of their obligations under the rules and procedures governing their operations.

If DTC is at any time unwilling or unable to continue as a depositary for the global registered notes or ceases to be a clearing agency registered under the Exchange Act and Teva Finance does not appoint a successor depositary within 90 days, Teva Finance will issue definitive registered notes in exchange for the global registered notes.

Definitive Notes. Definitive registered notes may be issued in exchange for notes represented by global registered notes only if Teva Finance does not appoint a successor depositary as set forth above under “—Global Notes; Book-Entry Form” or in other limited circumstances set forth in the indenture.

 

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UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

In the opinion of Willkie Farr & Gallagher LLP, the following are the material U.S. federal income tax consequences of ownership and disposition of the notes. This discussion only applies to notes that meet all of the following conditions:

 

    they are purchased by those initial holders who purchase notes at the respective “issue price,” which will equal the first price to the public (not including bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers) at which a substantial amount of the notes is sold for money; and

 

    they are held as capital assets.

This discussion does not describe all of the tax consequences that may be relevant to holders in light of their particular circumstances or to holders subject to special rules, such as:

 

    certain financial institutions;

 

    insurance companies;

 

    dealers in securities or foreign currencies;

 

    persons holding notes as part of a hedge or other integrated transaction;

 

    U.S. Holders (as defined below) whose functional currency is not the U.S. dollar;

 

    partnerships or other entities classified as partnerships for U.S. federal income tax purposes; and

 

    persons subject to the alternative minimum tax.

This summary is based on the Internal Revenue Code of 1986, as amended to the date hereof, administrative pronouncements, judicial decisions and final, temporary and proposed Treasury Regulations, changes to any of which subsequent to the date of this prospectus supplement may affect the tax consequences described herein. This summary addresses only U.S. federal income tax consequences, and does not address the state, local, foreign tax laws or the Medicare tax on net investment income. Persons considering the purchase of notes are urged to consult their tax advisers with regard to the application of the U.S. federal income tax laws to their particular situations as well as any tax consequences arising under the laws of any state, local or foreign taxing jurisdiction.

Tax Consequences to U.S. Holders

As used herein, the term “U.S. Holder” means a beneficial owner of a note that is for U.S. federal income tax purposes:

 

    a citizen or resident of the United States;

 

    a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or of any political subdivision thereof; or

 

    an estate or trust the income of which is subject to U.S. federal income taxation regardless of its source.

The term “U.S. Holder” also includes certain former citizens and residents of the United States.

Payments of Interest

It is expected (and this discussion assumes) that the notes will be issued without original issue discount (“OID”) for U.S. federal income tax purposes. In general, however, in the event the notes are issued with more than de minimis OID, U.S. Holders will be required to include OID in ordinary gross income on a constant-yield basis for U.S. federal income tax purposes as it accrues, although the U.S. Holder may not yet have received cash

 

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attributable to that income. Interest paid on a note (including any additional amounts and tax withheld from such interest or additional amounts) will be taxable to a U.S. Holder as ordinary interest income at the time it accrues or is received in accordance with the U.S. Holder’s method of accounting for federal income tax purposes.

Interest income earned by a U.S. Holder will constitute foreign source income for U.S. federal income tax purposes, which may be relevant to a U.S. Holder in calculating the holder’s foreign tax credit limitation. The limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. The rules governing foreign tax credits are complex and, therefore, U.S. Holders should consult their own tax advisors regarding the availability of foreign tax credits in their particular circumstances.

Sale, Exchange or Retirement of the Notes

Upon the sale, exchange or retirement of a note, a U.S. Holder will recognize taxable gain or loss equal to the difference between the amount realized on the sale, exchange or retirement and the Holder’s adjusted tax basis in the note. A U.S. Holder’s adjusted tax basis in a note generally will equal its initial investment in that note. For these purposes, the amount realized does not include any amount attributable to accrued interest. Amounts attributable to accrued interest are treated as interest as described under “—Payments of Interest” above.

Gain or loss realized on the sale, exchange or retirement of a note will generally be U.S. source capital gain or loss and will be long-term capital gain or loss if at the time of sale, exchange or retirement the note has been held for more than one year. Certain non-corporate U.S. Holders are eligible for a reduced rate of tax on long-term capital gains. The deductibility of capital losses is subject to limitations.

Backup Withholding and Information Reporting

Information returns will be filed with the Internal Revenue Service in connection with payments on the notes and the proceeds from a sale or other disposition of the notes. A U.S. Holder will be subject to U.S. backup withholding tax on these payments if the U.S. Holder fails to provide its taxpayer identification number to the paying agent and comply with certain certification procedures or does not otherwise establish an exemption from backup withholding. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder’s U.S. federal income tax liability and may entitle the U.S. Holder to a refund, provided that the required information is furnished to the Internal Revenue Service.

Tax Consequences to Non-U.S. Holders

As used herein, the term “Non-U.S. Holder” means a beneficial owner of a note that is, for U.S. federal income tax purposes:

 

    an individual who is classified as a nonresident for U.S. federal income tax purposes;

 

    a foreign corporation; or

 

    a foreign estate or trust.

“Non-U.S. Holder” does not include a holder who is an individual present in the United States for 183 days or more in the taxable year of disposition and who is not otherwise a resident of the United States for U.S. federal income tax purposes. Such a holder is urged to consult his or her own tax advisor regarding the U.S. federal income tax consequences of the sale, exchange or other disposition of a note.

Subject to the discussion under “—Certification Requirement” below, there generally should not be any material U.S. federal income tax consequences to a Non-U.S. Holder of the notes . However, because the proceeds of the notes may be on-lent, in whole or in part, to a U.S. corporation, interest paid to a Non-U.S.

 

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Holder may be subject to U.S. federal income tax rules applicable to certain back-to-back financing arrangements through non-U.S. intermediaries. If applicable, these rules could impose on Teva Finance a withholding obligation with respect to interest payments to Non-U.S. Holders even though Teva Finance itself is not a U.S. person. In that event, a Non-U.S. Holder of the notes should still be entitled to an exemption from U.S. withholding if:

 

    the Non-U.S. Holder does not own, actually or constructively, 10% or more of the total combined voting power of all classes of stock of the U.S. borrower entitled to vote and is not a controlled foreign corporation related, directly or indirectly, to the U.S. borrower through stock ownership; and

 

    the certification requirement described below has been fulfilled with respect to the beneficial owner, as discussed below.

Certification Requirement

If the rules relating to back-to-back financing arrangements described above apply, a Non-U.S. holder of the notes should expect that interest on the notes will not be exempt from withholding tax unless the beneficial owner of that note certifies on the applicable Internal Revenue Service Form W-8 (including W-8BEN or W-8BEN-E) under penalties of perjury, that it is not a U.S. person. In such case, if the beneficial owner of such a note fails to make this certification, payments of interest on that note will be subject to U.S. federal withholding tax at a rate of 30%.

If a Non-U.S. Holder of a note is engaged in a trade or business in the United States, and if interest on the note is effectively connected with the conduct of this trade or business (and, if an income tax treaty applies, is attributable to a permanent establishment or fixed base maintained by the Non-U.S. Holder in the United States), the Non-U.S. Holder, although exempt from the withholding tax discussed in the preceding paragraph, will generally be taxed in the same manner as a U.S. Holder (see “—Tax Consequences to U.S. Holders” above). These holders should consult their own tax advisors with respect to other U.S. tax consequences of the ownership and disposition of notes, including the possible imposition of a 30% branch profits tax.

Backup Withholding and Information Reporting

U.S. information reporting and backup withholding will generally not apply to payments made on the notes held through a non-U.S. bank or other non-U.S. financial institution that is a participant in Euroclear, Clearstream or The Depository Trust Company. In certain situations, however, information reporting and backup withholding may apply to these payments if a Non-U.S. Holder does not comply with applicable certification procedures to establish that it is not a U.S. person. Payments of sale proceeds made within the United States or through certain U.S.-related financial institutions may be subject to information reporting and backup withholding unless the Non-U.S. Holder complies with applicable certification procedures to establish that it is not a U.S. person.

Additional Withholding Requirements

On March 18, 2010, the Foreign Account Tax Compliance Act (“FATCA”) was signed into law as part of the Hiring Incentives to Restore Employment Act. Under certain circumstances, FATCA will impose a withholding tax of 30% on (i) certain payments of U.S. source interest, and, (ii) beginning on January 1, 2019, the gross proceeds receivable from the sale or disposition of certain assets that give rise to U.S. source dividend or interest payments. As described above, because the proceeds of the notes may be on-lent, in whole or in part, to a U.S. corporation, interest paid to a Non-U.S. Holder may be subject to U.S. federal income tax rules applicable to certain back-to-back financing arrangements through non-U.S. intermediaries, which could result in the notes being within the scope of FATCA. In general, no FATCA withholding will be required with respect to the Notes to the extent that a non-U.S. holder provides to us the documentation described above in “Non-U.S. Holders—Certification Requirement” certifying such non-U.S. holder’s FATCA compliance. Prospective investors are urged to consult their own tax advisors regarding the possible implications of FATCA with respect of the notes.

 

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DUTCH TAX CONSIDERATIONS

The following is a summary of certain material Dutch tax considerations relating to the purchase, ownership and disposition of the notes by persons who are not residents of The Netherlands for Dutch tax purposes. It is not, however, a complete analysis of all the potential tax considerations that may be applicable to all potential investors.

For Dutch tax purposes, a holder of notes may include an individual who, or an entity that, does not have the legal title to any notes, but to whom nevertheless notes are attributed based either on such individual or entity owning a beneficial interest in notes or based on specific statutory provisions. These include statutory provisions pursuant to which notes are attributed to an individual who is, or who has directly or indirectly inherited from a person who was, the settlor, grantor or similar originator of a trust, foundation or similar entity that holds such notes.

The following summary is based on Dutch tax law as applied and interpreted by Dutch courts and as published and in effect on the date of this prospectus supplement, without prejudice to any amendments introduced at a later date and implemented with or without retroactive effect.

For the purpose of this section, “Dutch Taxes” shall mean taxes of whatever nature levied by or on behalf of The Netherlands or any of its subdivisions or taxing authorities. “The Netherlands” means the part of the Kingdom of The Netherlands located in Europe.

Withholding tax

Any payments made under the notes will not be subject to withholding or deduction for, or on account of, any Dutch Taxes.

Taxes on income and capital gains

This paragraph does not describe the possible Dutch tax considerations or consequences that may be relevant to a holder of notes who is an individual and for whom the income or capital gains derived from the notes are attributable to employment activities, the income from which is taxable in The Netherlands, nor does this paragraph address the Dutch tax consequences for entities which are a resident of Aruba, Curaçao or Sint Maarten that have an enterprise which is carried on through a permanent establishment or a permanent representative on Bonaire, Sint Eustatius or Saba, and the notes are attributable to such permanent establishment or permanent representative.

A holder of notes will not be subject to any Dutch Taxes on any payment made to that holder under the notes or on any capital gain realized by the holder from the disposal, or deemed disposal, or redemption of the notes, except if:

 

  (1) the holder of notes is, or is deemed to be, resident in The Netherlands for Dutch (corporate) income tax purposes;

 

  (2) the holder of notes is an individual and has opted to be taxed as if resident in The Netherlands for Dutch income tax purposes;

 

  (3) the holder of notes is an individual and derives profits from an enterprise, whether as entrepreneur (ondernemer) or pursuant to a co-entitlement to the net worth of the enterprise other than as an entrepreneur or a shareholder, which enterprise is, in whole or in part, carried on through a permanent establishment (vaste inrichting) or a permanent representative (vaste vertegenwoordiger) in The Netherlands to which the notes are attributable;

 

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  (4) the holder of notes is an individual and has a substantial interest (aanmerkelijk belang), or a fictitious substantial interest (fictief aanmerkelijk belang), in Teva Finance or derives benefits from miscellaneous activities (overage werkzaamheden) carried out in The Netherlands in respect of the notes, including, without limitation, activities which are beyond the scope of active portfolio investment activities;

 

  (5) the holder of notes is not an individual and has a substantial interest, or a fictitious substantial interest, in Teva Finance, which (fictitious) substantial interest is not part of an artificial structure and one of the main purposes of the chosen ownership structure is the evasion of Dutch income tax or dividend withholding tax;

 

  (6) the holder of notes is not an individual and is entitled to a share in the profits of an enterprise or a co-entitlement to the net worth of an enterprise, other than by way of the holding of securities, which is effectively managed in The Netherlands and to which enterprise the notes are attributable; or

 

  (7) the holder of notes is an individual and is entitled to a share in the profits of an enterprise, other than by way of securities, which is effectively managed in The Netherlands and to which enterprise the notes are attributable.

Generally, a holder of notes has a substantial interest if such holder, alone or together with his partner, directly or indirectly:

 

  (1) owns, or holds certain rights on, shares representing five percent or more of the total issued and outstanding capital of Teva Finance, or of the issued and outstanding capital of any class of shares of Teva Finance;

 

  (2) holds rights to directly or indirectly acquire shares, whether or not already issued, representing five percent or more of the total issued and outstanding capital of Teva Finance, or of the issued and outstanding capital of any class of shares of Teva Finance; or

 

  (3) owns, or holds certain rights on, profit participating certificates that relate to five percent or more of the annual profit of Teva Finance or to five percent or more of the liquidation proceeds of Teva Finance.

A holder of notes who is an individual and has the ownership of shares of Teva Finance, will also have a substantial interest if his partner or one of certain relatives of the holder of notes or of his partner has a (fictitious) substantial interest.

For Dutch tax purposes, the ownership of shares of Teva Finance is attributed to a holder of notes based either on that holder owning a beneficial interest in shares of Teva Finance or based on specific statutory provisions. These include statutory provisions pursuant to which shares are attributed to an individual who is, or who has directly or indirectly inherited from a person who was, the settlor, grantor or similar originator of a trust, foundation or similar entity that holds the shares of Teva Finance, although the holder of notes does not have the legal title of such shares.

Generally, a holder of notes has a fictitious substantial interest if, without having an actual substantial interest in Teva Finance:

 

  (1) the shares have been obtained under gift law, inheritance law or matrimonial law, on a non-recognition basis, while the disposing shareholder had a substantial interest in Teva Finance;

 

  (2) the shares have been acquired pursuant to a share merger, legal merger or legal demerger, on an elective nonrecognition basis, while the holder of notes prior to this transaction had a substantial interest in a party to that transaction; or

 

  (3) the shares held by the holder of notes, prior to dilution, qualified as a substantial interest and, by election, no gain was recognized upon disqualification of these shares.

 

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Gift tax or inheritance tax

No Dutch gift tax or inheritance tax is due in respect of any gift of the notes by, or inheritance of the notes on the death of, a holder of notes, except if:

 

  (1) at the time of the gift or death of the holder of notes, the holder of notes is resident, or deemed to be resident, in The Netherlands;

 

  (2) the holder of notes passes away within 180 days after the date of the gift of the notes and is not, or is not deemed to be, at the time of the gift, but is, or is deemed to be, at the time of his death, resident in The Netherlands; or

 

  (3) the gift of the notes is made under a condition precedent and the holder of notes is resident, or deemed to be resident, in The Netherlands at the time the condition is fulfilled.

For purposes of Dutch gift or inheritance tax, an individual who is of Dutch nationality will be deemed to be resident in The Netherlands if he has been a resident in The Netherlands at any time during the ten years preceding the date of the gift or his death. For purposes of Dutch gift tax, any individual, irrespective of his nationality, will be deemed to be resident in The Netherlands if he has been a resident in The Netherlands at any time during the 12 months preceding the date of the gift.

Other taxes

No other Dutch Taxes, including turnover tax and taxes of a documentary nature, such as capital tax, stamp or registration tax or duty, are payable by or on behalf of a holder of notes by reason only of the issue, acquisition or transfer of the notes.

Residency

Subject to the exceptions above, a holder of notes will not become resident, or a deemed resident, in The Netherlands for tax purposes, or become subject to Dutch Taxes, by reason only of Teva Finance’s performance, or the holder’s acquisition (by way of issue or transfer to it), holding and/or disposal of the notes.

 

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ISRAELI TAX CONSIDERATIONS

The following is a summary of certain material Israeli tax considerations relating to the ownership of the notes by persons who are not residents of the State of Israel for Israeli tax purposes. It is not, however, a complete analysis of all the potential tax considerations that may be applicable to all potential investors.

The following discussion is for general information only. It is also applicable to beneficial owners of the notes. Investors considering the purchase of the notes should consult their own tax advisors with respect to the application of Israeli income tax laws to their particular situations as well as any tax consequences arising under any non-Israeli taxing jurisdiction or under any applicable tax treaty.

Israeli Tax Liability on Interest Payable by Teva to Non-Israeli Residents

An individual is subject to tax on interest at a reduced rate of up to 25%. The reduced rate is not available to an individual, if interest expenses are claimed as tax deductions with respect to the notes, if the individual is a “substantial shareholder,” (“substantial shareholder” for these purposes is a shareholder who holds directly or indirectly, including with others, at least 10% of any means of control in the company), if there is a special relationship between the individual and the company paying out the interest (unless certain conditions are met), or if the interest is a business income of the individual. In such cases, the individual will be subject to tax on the interest at his marginal tax rate.

Corporate entities are subject to corporate tax on their interest income. The corporate tax rate is currently 25%.

Non-Israeli residents are required to file an income tax return in Israel if they have Israeli sourced interest income, unless the full amount of tax was withheld.

Withholding Taxes on Interest Payable by Teva to Non-Israeli Residents

An Israeli company paying interest on a note denominated in a foreign currency to an individual who is a non-Israeli resident is required to withhold tax at a rate of 25%, except for (i) interest paid to a “substantial shareholder” (as defined above), or (ii) interest paid to an employee, a service provider or a supplier of such Israeli company, who are subject to tax according to the highest marginal tax rate applicable to individuals. Tax liability with respect to interest paid to non-Israeli residents by an Israeli company may be reduced under an applicable tax treaty. To benefit from such reduced rate under an applicable tax treaty, such non-Israeli residents should file an Israeli tax return based on such lower rate.

An Israeli company paying interest on a similar note to a corporate entity will be subject to withholding tax in accordance with the applicable corporate tax rate for the year in which the interest is paid, such rate is currently 25%.

The aforementioned might only apply if Teva as a guarantor pays interest on the notes.

Original Issue Discount. For Israeli income tax purposes, any principal amount reflecting original issue discount is generally treated in the same manner as interest.

Teva and Teva Finance have agreed to pay certain additional amounts in connection with withholding taxes or deductions that may be imposed by Israeli or Dutch authorities. See “Description of the Notes and the Guarantees—Additional Tax Amounts.”

 

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UNDERWRITING (CONFLICTS OF INTEREST)

Teva and Teva Finance have entered into an underwriting agreement with Barclays Capital Inc., BNP Paribas Securities Corp., Credit Suisse Securities (USA) LLC, HSBC Securities (USA) Inc., Merrill Lynch, Pierce Fenner & Smith Incorporated and Mizuho Securities USA Inc., as representatives of the underwriters, pursuant to which, and subject to the terms and conditions of which, Teva and Teva Finance have agreed to sell to the underwriters and the underwriters have severally agreed to purchase from them the principal amount of notes set forth in the following table.

 

Underwriters

  Principal
Amount
of the
2018 notes
    Principal
Amount
of the
2019 notes
    Principal
Amount
of the
2021 notes
    Principal
Amount
of the
2023 notes
    Principal
Amount
of the
2026 notes
    Principal
Amount
of the
2046 notes
 

Barclays Capital Inc.

  $ 135,000,000      $ 180,000,000      $ 270,000,000      $ 270,000,000      $ 315,000,000      $ 180,000,000   

BNP Paribas Securities Corp.

    135,000,000        180,000,000        270,000,000        270,000,000        315,000,000        180,000,000   

Credit Suisse Securities (USA) LLC

    135,000,000        180,000,000        270,000,000        270,000,000        315,000,000        180,000,000   

HSBC Securities (USA) Inc.

    135,000,000        180,000,000        270,000,000        270,000,000        315,000,000        180,000,000   

Merrill Lynch, Pierce Fenner & Smith

                       Incorporated

    135,000,000        180,000,000        270,000,000        270,000,000        315,000,000        180,000,000   

Mizuho Securities USA Inc.

    135,000,000        180,000,000        270,000,000        270,000,000        315,000,000        180,000,000   

Citigroup Global Markets Inc.

    135,000,000        180,000,000        270,000,000        270,000,000        315,000,000        180,000,000   

Morgan Stanley & Co. LLC

    135,000,000        180,000,000        270,000,000        270,000,000        315,000,000        180,000,000   

RBC Capital Markets, LLC

    135,000,000        180,000,000        270,000,000        270,000,000        315,000,000        180,000,000   

SMBC Nikko Securities America, Inc.

    135,000,000        180,000,000        270,000,000        270,000,000        315,000,000        180,000,000   

Bank of China Limited London Branch

    18,750,000        25,000,000        37,500,000        37,500,000        43,750,000        25,000,000   

BBVA Securities Inc.

    18,750,000        25,000,000        37,500,000        37,500,000        43,750,000        25,000,000   

Commerz Markets LLC

    18,750,000        25,000,000        37,500,000        37,500,000        43,750,000        25,000,000   

Lloyds Securities Inc.

    18,750,000        25,000,000        37,500,000        37,500,000        43,750,000        25,000,000   

MUFG Securities Americas Inc.

    18,750,000        25,000,000        37,500,000        37,500,000        43,750,000        25,000,000   

PNC Capital Markets LLC

    18,750,000        25,000,000        37,500,000        37,500,000        43,750,000        25,000,000   

Scotia Capital (USA) Inc.

    18,750,000        25,000,000        37,500,000        37,500,000        43,750,000        25,000,000   

TD Securities (USA) LLC

    18,750,000        25,000,000        37,500,000        37,500,000        43,750,000        25,000,000   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 1,500,000,000      $ 2,000,000,000      $ 3,000,000,000      $ 3,000,000,000      $ 3,500,000,000      $ 2,000,000,000   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The underwriting agreement provides that the underwriters’ obligation to purchase the notes to be purchased thereunder depends on the satisfaction of certain customary conditions contained in the underwriting agreement.

The underwriters have advised us that they intend to offer the notes initially at the applicable offering prices shown on the cover page of this prospectus supplement and may offer notes to certain dealers at the offering prices less selling concessions not to exceed 0.125% of the principal amount of the 2018 notes, 0.150% of the principal amount of the 2019 notes, 0.200% of the principal amount of the 2021 notes, 0.250% of the principal amount of the 2023 notes, 0.300% of the principal amount of the 2026 notes and 0.500% of the principal amount of the 2046 notes. The underwriters may allow, and dealers may reallow, concessions on sales to other dealers not to exceed 0.100% of the principal amount of the 2018 notes, 0.100% of the principal amount of the 2019 notes, 0.125% of the principal amount of the 2021 notes, 0.125% of the principal amount of the 2023 notes, 0.125% of the principal amount of the 2026 notes and 0.250% of the principal amount of the 2046 notes. After the initial offering of the notes, the underwriters may change the public offering prices and the concessions to selected dealers. The offering of the notes by the underwriters is subject to receipt and acceptance and is also subject to the underwriters’ right to reject any order in whole or in part.

Underwriting Discounts and Expenses

The following table shows the underwriting discounts to be paid to the underwriters in connection with this offering. The underwriting discounts are equal to 0.225% of the principal amount of the 2018 notes, to 0.250% of the principal amount of the 2019 notes, to 0.350% of the principal amount of the 2021 notes, to 0.400% of the principal amount of the 2023 notes, to 0.450% of the principal amount of the 2026 notes and 0.875% of the principal amount of the 2046 notes.

 

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     Per Note     Total  

2018 notes

     0.225   $ 3,375,000   

2019 notes

     0.250        5,000,000   

2021 notes

     0.350        10,500,000   

2023 notes

     0.400        12,000,000   

2026 notes

     0.450        15,750,000   

2046 notes

     0.875        17,500,000   
    

 

 

 

Total

     0.428   $ 64,125,000   
    

 

 

 

The expenses of the offering that are payable by us, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding underwriting discounts, will be approximately $3.0 million.

Prior to this offering, there has been no public market for the notes. One or more of the underwriters have advised us that they intend to make markets in the notes as permitted by applicable laws and regulations. The underwriters are not obligated, however, to make markets in the notes, and they may discontinue this market making at any time in their sole discretion. Accordingly, we cannot assure investors that there will be adequate liquidity or adequate trading markets for the notes.

Price Stabilization and Short Positions

The underwriters may engage in over-allotment and stabilizing transactions or purchases and passive market making for the purpose of pegging, fixing or maintaining the prices of the notes in accordance with Regulation M under the Exchange Act:

 

    Over-allotment involves sales by the underwriters of notes in excess of the number of notes the underwriter is obligated to purchase, which creates a short position. Since the underwriters in this offering do not have an option to purchase additional securities, their short position will be a naked short position. A naked short position can only be closed out by buying notes in the open market. A naked short position is more likely to be created if the underwriters are concerned that there could be downward pressure on the prices of the notes in the open market after pricing that could adversely affect investors who purchase in the offering.

 

    Stabilizing transactions permit bids to purchase the notes so long as the stabilizing bids do not exceed a specified maximum. These stabilizing transactions as well as other purchases made by the underwriters for their own accounts may have the effect of raising or maintaining the market prices of the notes or preventing or retarding a decline in the market prices of the notes. As a result, the prices of the notes may be higher than the prices that might otherwise exist in the open market. These transactions, if commenced, may be discontinued at any time. The underwriters also may impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased notes sold by or for the account of such underwriter in stabilizing or short covering transactions.

Neither we nor the underwriters make any representations or predictions as to the direction or magnitude of any effect that the transactions described above may have on the prices of the notes. In addition, neither we nor the underwriters make representations that the representatives will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.

Lock-up Agreements

Teva Finance and Teva have agreed with the underwriters that, unless we receive the prior written consent of Barclays Capital Inc., BNP Paribas Securities Corp., Credit Suisse Securities (USA) LLC, HSBC Securities

 

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(USA) Inc., Merrill Lynch, Pierce Fenner & Smith Incorporated and Mizuho Securities USA Inc., which we refer to as the representatives, we may not, subject to certain customary exceptions, from the date of the underwriting agreements to the closing date of this offering, directly or indirectly, offer, sell, or contract to sell, or otherwise dispose of any debt securities (other than the notes offered hereby and the contemplated Euro senior notes offering and CHF senior notes offering) issued or guaranteed by Teva Finance or Teva.

Indemnification

We have agreed to indemnify the several underwriters against liabilities relating to the offering, including liabilities under the Securities Act of 1933, as amended, and liabilities arising from breaches of certain representations and warranties contained in the underwriting agreement, and to contribute to payments that the underwriters may be required to make for these liabilities.

Stamp Taxes

Purchasers of the notes offered by this prospectus supplement may be required to pay stamp taxes and other charges under the laws and practices of the country of purchase, in addition to the offering price listed on the cover page of this prospectus supplement. Accordingly, we urge you to consult a tax advisor with respect to whether you may be required to pay taxes or charges, as well as any other consequences that may arise under the laws of the country of purchase.

Canadian Legal Matters

The notes may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the notes must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus supplement and the accompanying prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.

Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.

Israeli Legal Matters

This prospectus supplement and the accompanying prospectus do not constitute a prospectus under the Israeli Securities Law, 5728-1968 (the “Israeli Securities Law”) and have not been filed with, or approved by, the Israel Securities Authority and are not, and under no circumstances are to be construed as, an advertisement or a public offering of securities in Israel.

In Israel, this prospectus supplement and the accompanying prospectus may be distributed only to, and may be directed only at, persons who have confirmed in writing that (a) they qualify as one of the types of investors listed in the First Addendum to the Israeli Securities Law, and are aware of the implications of being an investor of this type and agree thereto, and (b) they are acquiring the notes for their own account and not with a view to, or for resale in connection with, any distribution thereof.

 

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European Economic Area Legal Matters

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member State), each underwriter has represented, warranted and agreed that it has not made and will not make an offer of notes to the public in that Relevant Member State except that it may make an offer of notes:

 

  a) to any legal entity which is a qualified investor as such term is defined in the Prospectus Directive;

 

  b) to fewer than 150 natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive subject to obtaining the prior consent of the other underwriters; or

 

  c) in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided no such offer of the notes shall result in a requirement for the publication by Teva Finance or the underwriters of a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer of notes to the public” in relation to any notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the notes to be offered so as to enable an investor to decide to purchase or subscribe for the notes, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State and the expression Prospectus Directive means Directive 2003/71/EC (and amendments thereto, including by Directive 2010/73/EU), and includes any relevant implementing measure in the Relevant Member State.

United Kingdom Legal Matters

Each underwriter has represented, warranted and agreed that:

 

    it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (the “FSMA”)) received by it in connection with the issue or sale of the notes in circumstances in which Section 21(1) of the FSMA does not apply to Teva Finance or Teva; and

 

    it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the notes in, from or otherwise involving the United Kingdom.

Italy Legal Matters

The offering of the notes has not been registered with or cleared by the Italian Securities Exchange Commission (Commissione Nazionale per le Societá e la Borsa, “CONSOB”) pursuant to Italian securities legislation and, therefore, no notes may be offered, sold or delivered, nor may copies of this prospectus supplement or of any other document relating to the notes be distributed in the Republic of Italy, except: (a) to qualified investors (investitori qualificati) as defined in Article 100 of Legislative Decree No. 58 of 24 February 1998, as amended (the “Financial Services Act”) and Article 34-ter, first paragraph, letter b) of CONSOB Regulation No. 11971 of 14 May 1999, as amended from time to time (“Regulation No. 11971”); or (b) in other circumstances which are exempted from the rules on public offerings pursuant to Article 100 of the Financial Services Act and Article 34-ter of Regulation No. 11971.

Any offer, sale or delivery of the notes or distribution of copies of this prospectus supplement or any other document relating to the notes in the Republic of Italy under (a) or (b) above may and will be effected in accordance with all Italian securities, tax, exchange control and other applicable laws and regulations, and, in particular, must be: (i) made by an investment firm, bank or financial intermediary permitted to conduct such activities in the Republic of Italy in accordance with the Financial Services Act, CONSOB Regulation No. 16190

 

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of 29 October 2007 (as amended from time to time) and Legislative Decree No. 385 of 1 September 1993, as amended (the “Banking Act”); and(ii) in compliance with Article 129 of the Banking Act, as amended, and the implementing guidelines of the Bank of Italy, as amended from time to time, pursuant to which the Bank of Italy may request information on the issue or the offer of securities in the Republic of Italy; and (iii) in compliance with any other applicable laws and regulations or requirements imposed by CONSOB or any other Italian authority.

Any investor purchasing the notes is solely responsible for ensuring that any offer or resale of the notes it purchased in the offering occurs in compliance with applicable Italian laws and regulations.

Please note that in accordance with Article 100-bis of the Financial Services Act, where no exemption from the rules on public offerings applies under (a) and (b) above, the subsequent resale of the notes on the secondary market in Italy must be made in compliance with the public offer and the prospectus requirement rules provided under the Financial Services Act and Regulation No. 11971. Failure to comply with such rules may result in the subsequent re-sale of such notes being declared null and void and in the liability of the intermediary transferring the notes for any damages suffered by the investors.

Hong Kong Legal Matters

The contents of this prospectus have not been reviewed by any regulatory authority in Hong Kong. The notes may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), or (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), and no advertisement, invitation or document relating to the notes may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to notes which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.

Japan Legal Matters

The securities have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the Financial Instruments and Exchange Law) and each underwriter has agreed that it will not offer or sell any securities, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.

Singapore Legal Matters

This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the notes may not be circulated or distributed, nor may the notes be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the “SFA”), (ii) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

 

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Where the notes are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for six months after that corporation or that trust has acquired the notes under Section 275 except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA; (2) where no consideration is given for the transfer; or (3) by operation of law.

Each underwriter has represented and agreed that it will comply with applicable laws and regulations in each jurisdiction in which it acquires, offers, sells or delivers the notes, or has in its possession or distributes any free writing prospectus and any preliminary prospectus or final prospectus relating to the notes.

Conflicts of Interest

The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. From time to time, the underwriters and their respective affiliates have directly and indirectly provided investment and/or commercial banking services to us, and may do so in the future, for which they have received customary compensation and expense reimbursement, including, but not limited to, serving as financial advisors to us and assisting in obtaining financing and acting as lenders under our credit facilities. In particular, the underwriters and/or affiliates of each of the underwriters are lenders under the new term loan facility, the revolving line of credit and the bridge facility. As described in “Use of Proceeds,” depending on the timing of the closing of the Actavis Generics acquisition, we may need to borrow additional funds under our bridge facility, which we expect to repay with the proceeds of this offering and the other contemplated offerings. In the event that the net proceeds of this offering are used to repay the borrowings under the bridge facility, the underwriters and their affiliates that are lenders under that facility will receive 5% or more of the proceeds from this offering. Because of the manner in which the net proceeds from this offering may be used, this offering will be conducted in accordance with FINRA Rule 5121. Under FINRA Rule 5121, the appointment of a “qualified independent underwriter” is not necessary in connection with this offering.

Certain of the underwriters that have a lending relationship with us and their respective affiliates routinely hedge, and certain other of the underwriters and their respective affiliates may hedge, their credit exposure to us consistent with their customary risk management policies. Typically, these underwriters and their respective affiliates would hedge such exposure by entering into transactions which consist of either the purchase of credit default swaps or the creation of short positions in our securities or the securities of our affiliates, which may include the notes offered hereby. Any such credit default swaps or short positions could adversely affect future trading prices of the notes offered hereby.

In the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments, including serving as counterparties to certain derivative and hedging arrangements, and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or instruments of Teva or Teva Finance. The underwriters and their respective affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.

 

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EXPERTS

The financial statements and management’s assessment of the effectiveness of internal control over financial reporting (which is included in management’s report on internal control over financial reporting) incorporated in this prospectus supplement by reference to Teva’s Annual Report on Form 20-F for the year ended December 31, 2015 have been so incorporated in reliance on the report of Kesselman & Kesselman, an independent registered public accounting firm in Israel and a member firm of PricewaterhouseCoopers International Limited, given on the authority of said firm as experts in auditing and accounting.

The audited special purpose combined financial statements of the Global Generics Business and Certain Other Assets of Allergan plc included in Teva’s Report of Foreign Private Issuer on Form 6-K dated July 13, 2016 have been incorporated by reference in reliance on the report (which contains an explanatory paragraph related to the fact that the financial statements are not intended to be a complete presentation of the financial position or operations of the Global Generics Business and Certain Other Assets of Allergan plc as described in Note 1 to the financial statements) of PricewaterhouseCoopers LLP, independent accountants, given on the authority of said firm as experts in auditing and accounting.

LEGAL MATTERS

Certain legal matters with respect to United States and New York law with respect to the validity of the notes offered by this prospectus supplement will be passed upon for Teva Finance by Willkie Farr & Gallagher LLP, New York, New York. Certain legal matters with respect to Israeli law with respect to the validity of the notes offered by this prospectus supplement will be passed upon for Teva by Tulchinsky Stern Marciano Cohen Levitski & Co., Israel. Certain legal matters with respect to Dutch law will be passed upon for the issuers by Van Doorne N.V., Netherlands. Certain legal matters relating to this offering will be passed upon for the underwriters by Cleary Gottlieb Steen & Hamilton LLP, New York, New York, and, with respect to Israeli law, by Herzog, Fox and Neeman, Israel.

WHERE YOU CAN FIND MORE INFORMATION

This prospectus supplement is part of a registration statement that we have filed with the SEC. The registration statement, including the attached exhibits, contains additional relevant information about us. The rules and regulations of the SEC allow us to omit some of the information included in the registration statement from this prospectus supplement. In addition, we file annual and special reports and other information with the SEC. You may read and copy such material at the public reference facilities maintained by the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549, as well as at the SEC’s regional offices. You may also obtain copies of such material from the SEC at prescribed rates by wiring to the Public Reference Section of the SEC, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms.

The SEC maintains an Internet website at http://www.sec.gov that contains reports, proxy, information statements and other material that are filed through the SEC’s Electronic Data Gathering, Analysis and Retrieval (“EDGAR”) system and filed electronically with the SEC. We began filing through the EDGAR system on October 31, 2002.

Our ADSs are quoted on the New York Stock Exchange under the symbol “TEVA.” You may inspect certain reports and other information concerning us at the offices of the Financial Industry Regulatory Authority, 1735 K Street, N.W., Washington, D.C. 20006.

Information about us is also available on our website at http://www.tevapharm.com. Such information on our website is not part of this prospectus supplement or the accompanying prospectus.

 

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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The rules of the SEC allow us to incorporate by reference information into this prospectus supplement and the accompanying prospectus. The information incorporated by reference is considered to be a part of this prospectus supplement and the accompanying prospectus, and information that we file later with the SEC will automatically update and supersede this information.

The following documents filed with the SEC are incorporated into this prospectus supplement and the accompanying prospectus by reference:

 

  (1) Our Annual Report on Form 20-F for the year ended December 31, 2015;

 

  (2) Our Reports of Foreign Private Issuer on Form 6-K, filed with the SEC on January 4, 2016 (two reports), January 5, 2016, January 6, 2016, January 7, 2016 (report filed at 8:24:25 a.m. EST), January 25, 2016, January 28, 2016 (report filed at 12:23:33 p.m. EST), February 2, 2016, February 24, 2016, February 29, 2016, March 3, 2016 (report filed at 9:22:03 a.m. EST), March 9, 2016, March 10, 2016, March 14, 2016, March 15, 2016, March 22, 2016, March 23, 2016, April 1, 2016 (report filed at 9:29:14 a.m. EDT), April 18, 2016 (report filed at 1:35:02 p.m. EDT), April 29, 2016, May 9, 2016 (report filed at 11:09:47 a.m. EDT), May 31, 2016 (report filed at 7:23:26 a.m. EDT), June 7, 2016 (report filed at 3:44:15 p.m. EDT), June 10, 2016, June 13, 2016, June 23, 2016, June 24, 2016, June 27, 2016, June 28, 2016, July 5, 2016 and July 13, 2016 (reports filed at 6:00:00 a.m. EST and 10:34:58 a.m. EST).

All reports and other documents filed by Teva pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and until this offering is completed, shall be deemed to be incorporated by reference in this prospectus supplement and the accompanying prospectus.

Any statement contained in a document incorporated or deemed to be incorporated by reference shall be deemed to be modified or superseded for purposes of this prospectus supplement and the accompanying prospectus to the extent that a statement contained in this prospectus supplement and the accompanying prospectus or in any other subsequently filed document which is incorporated or deemed to be incorporated by reference modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus supplement and the accompanying prospectus.

You may also obtain copies of these documents free of charge by contacting us at our address or telephone number set forth below:

Teva Pharmaceutical Industries Limited

Investor Relations

5 Basel Street

P.O. Box 3190

Petach Tikva 4951033 Israel

+972-3-926-7267

 

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TEVA PHARMACEUTICAL INDUSTRIES LIMITED

American Depositary Shares, each representing

one Ordinary Share, Debt Securities,

Purchase Contracts, Units and Warrants

TEVA PHARMACEUTICAL FINANCE IV, LLC

TEVA PHARMACEUTICAL FINANCE V, LLC

TEVA PHARMACEUTICAL FINANCE VI, LLC

TEVA PHARMACEUTICAL FINANCE COMPANY B.V.

TEVA PHARMACEUTICAL FINANCE IV B.V.

TEVA PHARMACEUTICAL FINANCE V B.V.

TEVA PHARMACEUTICAL FINANCE N.V.

TEVA PHARMACEUTICAL FINANCE NETHERLANDS II B.V.

TEVA PHARMACEUTICAL FINANCE NETHERLANDS III B.V.

TEVA PHARMACEUTICAL FINANCE NETHERLANDS IV B.V.

Debt Securities, fully and unconditionally guaranteed by

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

We and our finance subsidiaries may offer and sell from time to time:

 

   

American Depositary Shares, or ADSs, each representing one ordinary share;

 

   

senior or subordinated debt securities;

 

   

purchase contracts;

 

   

units; and

 

   

warrants.

We will provide the specific terms and initial public offering prices of these securities in supplements to this prospectus. You should read this prospectus and any supplement carefully before you invest.

We may sell these securities to or through underwriters and also to other purchasers or through agents. The names of any underwriters or agents will be stated in an accompanying prospectus supplement.

Our ADSs are quoted on the New York Stock Exchange under the symbol “TEVA.” If we decide to list any of these other securities on a national securities exchange upon issuance, the applicable prospectus supplement to this prospectus will identify the exchange and the date when we expect trading to begin.

 

 

Investing in our securities involves risks. You should consider the risk factors described in any accompanying prospectus supplement and the documents we incorporate by reference. See “Risk Factors” beginning on page 5 of this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The date of this prospectus is July 13, 2016.


Table of Contents

TABLE OF CONTENTS

 

ABOUT THIS PROSPECTUS

     1   

TEVA PHARMACEUTICAL INDUSTRIES LIMITED

     2   

FINANCE SUBSIDIARIES

     3   

RISK FACTORS

     5   

FORWARD-LOOKING STATEMENTS

     5   

RATIO OF EARNINGS TO FIXED CHARGES

     6   

PRICE RANGE OF ADSs AND ORDINARY SHARES

     6   

USE OF PROCEEDS

     8   

DESCRIPTION OF ORDINARY SHARES

     8   

DESCRIPTION OF MANDATORY CONVERTIBLE PREFERRED SHARES

     11   

DESCRIPTION OF AMERICAN DEPOSITARY SHARES

     12   

DESCRIPTION OF DEBT SECURITIES AND GUARANTEES

     19   

DESCRIPTION OF PURCHASE CONTRACTS

     28   

DESCRIPTION OF UNITS

     28   

DESCRIPTION OF WARRANTS

     29   

TAXATION

     29   

PLAN OF DISTRIBUTION

     30   

EXPERTS

     32   

LEGAL MATTERS

     32   

WHERE YOU CAN FIND MORE INFORMATION

     32   

ENFORCEMENT OF CIVIL LIABILITIES

     34   


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ABOUT THIS PROSPECTUS

This prospectus is part of a Registration Statement that Teva and the other registrants filed with the United States Securities and Exchange Commission (the “SEC”) utilizing a “shelf” registration process. Under this shelf process, any of the registrants may, from time to time, sell the securities described in this prospectus in one or more offerings.

This prospectus provides you with a general description of the securities which we may offer and the related guarantees, if any, of those securities. Each time we sell securities we will provide a prospectus supplement that will contain specific information about the terms of the offering. The prospectus supplement may also add, update or change information contained in this prospectus. You should read both this prospectus and any prospectus supplement together with additional information described below under the heading “Where You Can Find More Information” before purchasing any of our securities.

We have not authorized anyone to provide any information or to make any representation other than those contained or incorporated by reference in this prospectus. “Incorporated by reference” means that we can disclose important information to you by referring you to another document filed separately with the SEC. We have not authorized any other person to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on it. We are not making, nor will we make, an offer to sell securities in any jurisdiction where the offer or sale is not permitted. You should assume that the information appearing in this prospectus and any supplement to this prospectus is current only as of the dates on their respective covers. Our business, financial condition, results of operations and prospects may have changed since that date.

Unless the context otherwise requires, references in this prospectus and any supplement to this prospectus to “Teva,” “we,” “us” and “our” refer to Teva Pharmaceutical Industries Limited and its subsidiaries, collectively. References to “Teva Finance IV LLC” refer to Teva Pharmaceutical Finance IV, LLC. References to “Teva Finance V LLC” refer to Teva Pharmaceutical Finance V, LLC. References to “Teva Finance VI LLC” refer to Teva Pharmaceutical Finance VI, LLC. References to the “LLCs” refer to Teva Finance IV LLC, Teva Finance V LLC and Teva Finance VI LLC. References to “Teva Finance Company BV” refer to Teva Pharmaceutical Finance Company B.V. References to “Teva Finance IV BV” refer to Teva Pharmaceutical Finance IV B.V. References to “Teva Finance V BV” refer to Teva Pharmaceutical Finance V B.V. References to “Teva Finance NV” refer to Teva Pharmaceutical Finance N.V. References to the “BVs” refer to Teva Finance Company BV, Teva Finance IV BV, Teva Finance V BV and Teva Finance NV. References to “Teva Finance Netherlands II” refer to Teva Pharmaceutical Finance Netherlands II B.V. References to “Teva Finance Netherlands III” refer to Teva Pharmaceutical Finance Netherlands III B.V. References to “Teva Finance Netherlands IV” refer to Teva Pharmaceutical Finance Netherlands IV B.V. References to the “Netherlands BVs” refer to Teva Finance Netherlands II, Teva Finance Netherlands III and Teva Finance Netherlands IV. References to the “finance subsidiaries” refer to the LLCs, the BVs and the Netherlands BVs, collectively.

 

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TEVA PHARMACEUTICAL INDUSTRIES LIMITED

General

We are a global pharmaceutical company, committed to increasing access to high-quality healthcare by developing, producing and marketing affordable generic medicines and a focused portfolio of specialty medicines. We operate in pharmaceutical markets worldwide, with a significant presence in the United States, Europe and other markets. As a world leading pharmaceutical company, we are strategically positioned to benefit from ongoing changes in the global healthcare environment.

We seek to address unmet patient needs while capitalizing on evolving market, economic and legislative dynamics in global healthcare. These dynamics include the aging population, increased spending on pharmaceuticals in emerging markets, economic pressure on governments and private payors to provide accessible healthcare solutions, legislative and regulatory reforms, an increase in patient awareness and the growing importance of over-the-counter (“OTC”) medicines.

We believe that our dedicated leadership and employees, world-leading generics expertise and portfolio, focused specialty portfolio, global reach, robust R&D capabilities and global infrastructure and scale position us to take advantage of opportunities created by these dynamics.

Segments

We operate our business in two segments:

 

   

Generic medicines, which include chemical and therapeutic equivalents of originator medicines in a variety of dosage forms, including tablets, capsules, injectables, inhalants, liquids, ointments and creams. We are the leading generic drug company in the United States and Europe, and we have a significant or growing presence in our Rest of the World markets. We are also one of the world’s leading manufacturers of active pharmaceutical ingredients.

 

   

Specialty medicines, which include several franchises, most significantly our core therapeutic areas of central nervous system medicines such as Copaxone®, Azilect® and Nuvigil® and of respiratory medicines such as ProAir® HFA and QVAR®. Our specialty medicines segment includes other therapeutic areas, such as oncology medicines, including Treanda®, women’s health and selected other areas.

In addition to these two segments, we have other activities, primarily PGT Healthcare, our OTC consumer healthcare joint venture with The Procter & Gamble Company.

Actavis Generics Acquisition

On July 26, 2015, we entered into a definitive agreement (the “Master Purchase Agreement”) with Allergan plc to acquire its worldwide generic pharmaceuticals business and certain other assets, which we refer to as “Actavis Generics.” Following an amendment to the Master Purchase Agreement dated July 11, 2016, we will pay total consideration of $33.5 billion in cash and approximately 100 million of Teva’s ordinary shares, to be issued to Allergan at the closing of the transaction. Closing of the transaction is subject to certain conditions, including relevant regulatory approvals. Other than the closing conditions that can only be satisfied on the closing date, we believe that the only unsatisfied closing condition is the approval of the U.S. Federal Trade Commission (“FTC”). We expect that closing will occur shortly, based upon our current estimate of the timing to obtain clearance from the FTC. We previously received regulatory approval from the European Commission for the acquisition, subject to certain divestitures. In connection with the closing of the Actavis Generics acquisition, due to regulatory requirements, we expect to divest products with aggregate revenues in 2015 of approximately $1.1 billion.

Following consummation of the acquisition, our generic medicines segment is expected to make up a much larger percentage of our revenues. Further information about the Actavis Generics acquisition, including a copy of the Master Purchase Agreement, as amended, is contained in our Reports of Foreign Private Issuer on Form 6-K filed by us with the SEC on July 28, 2015 and July 13, 2016.

 

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The special purpose combined financial statements and other information relating to Actavis Generics are included in a Report of Foreign Private Issuer on Form 6-K we filed with the SEC on July 13, 2016.

 

 

Teva was incorporated in Israel on February 13, 1944, and is the successor to a number of Israeli corporations, the oldest of which was established in 1901. Our executive offices are located at 5 Basel Street, P.O. Box 3190, Petach Tikva 4951033, Israel, and our telephone number is +972-3-926-7267.

FINANCE SUBSIDIARIES

Teva has organized various finance subsidiaries for the purpose of issuing debt securities pursuant to this prospectus. There are no separate financial statements of the finance subsidiaries in this prospectus because these entities are, or will be treated as, subsidiaries of Teva for financial reporting purposes. We do not believe the financial statements would be helpful to the holders of the securities of these entities because:

 

   

Teva is a reporting company under the Securities Exchange Act of 1934, as amended (referred to in this prospectus as the “Exchange Act”), and owns, directly or indirectly, all of the voting interests of these entities;

 

   

these entities do not have any independent operations and do not propose to engage in any activities other than issuing securities and investing the proceeds in Teva or its affiliates; and

 

   

these entities’ obligations under the securities will be fully and unconditionally guaranteed by Teva.

These entities are exempt from the information reporting requirements of the Exchange Act.

Teva Finance IV LLC

Teva Finance IV LLC is a limited liability company that was formed on December 1, 2008 under the Delaware Limited Liability Company Act, as amended. Its address is 1090 Horsham Road, North Wales, Pennsylvania 19454, telephone number (215) 591-3000.

Teva Finance V LLC

Teva Finance V LLC is a limited liability company that was formed on December 1, 2011 under the Delaware Limited Liability Company Act, as amended. Its address is 1090 Horsham Road, North Wales, Pennsylvania 19454, telephone number (215) 591-3000.

Teva Finance VI LLC

Teva Finance VI LLC is a limited liability company that was formed on December 1, 2011 under the Delaware Limited Liability Company Act, as amended. Its address is 1090 Horsham Road, North Wales, Pennsylvania 19454, telephone number (215) 591-3000.

Teva Finance Company BV

Teva Finance BV is a Curaçao private limited liability company that was formed on November 23, 2005. Its address is Schottegatweg Oost 29-D, Curaçao, telephone number +5999 7366066.

Teva Finance IV BV

Teva Finance IV BV is a Curaçao private limited liability company that was formed on June 28, 2011. Its address is Schottegatweg Oost 29-D, Curaçao, telephone number +5999 7366066.

 

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Teva Finance V BV

Teva Finance V BV is a Curaçao private limited liability company that was formed on June 28, 2011. Its address is Schottegatweg Oost 29-D, Curaçao, telephone number +5999 7366066.

Teva Finance NV

Teva Finance NV is a Curaçao limited liability company that was formed on December 29, 2000. Its address is Schottegatweg Oost 29-D, Curaçao, telephone number +5999 7366066.

Teva Finance Netherlands II

Teva Finance Netherlands II is a Dutch private limited liability company that was formed on October 16, 2013. Its address is Piet Heinkade 107, 1019 GM Amsterdam, Netherlands, telephone number +31 (0)20-2193000.

Teva Finance Netherlands III

Teva Finance Netherlands III is a Dutch private limited liability company that was formed on September 21, 2015. Its address is Piet Heinkade 107, 1019 GM Amsterdam, Netherlands, telephone number +31 (0)20-2193000.

Teva Finance Netherlands IV

Teva Finance Netherlands IV is a Dutch private limited liability company that was formed on April 22, 2016. Its address is Piet Heinkade 107, 1019 GM Amsterdam, Netherlands, telephone number +31 (0)20-2193000.

 

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RISK FACTORS

Investing in our securities involves risk. Please see the risk factors set forth in Part I, Item 3 in our Annual Report on Form 20-F for our most recent fiscal year, as updated by our Reports of Foreign Private Issuer on Form 6-K and other filings we make from time to time with the SEC, as incorporated by reference in this prospectus. Additional risk factors may be included in a prospectus supplement relating to a particular series or offering of securities. Before making an investment decision, you should carefully consider these risks as well as other information we include or incorporate by reference in this prospectus and any accompanying prospectus supplement.

FORWARD-LOOKING STATEMENTS

The disclosure and analysis in this prospectus, including statements that are predictive in nature, or that depend upon or refer to future events or conditions, contain or incorporate by reference some forward-looking statements within the meaning of Section 21E of the Exchange Act and Section 27A of the Securities Act of 1933, as amended, referred to in this prospectus as the “Securities Act.” Forward-looking statements describe our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Such statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. In particular, these statements include, among other things, statements relating to:

 

   

our business strategy;

 

   

the anticipated results of acquisitions, including our pending Actavis Generics acquisition;

 

   

the development and launch of our products, including product approvals and results of clinical trials;

 

   

projected markets and market size;

 

   

anticipated results of litigation and regulatory proceedings;

 

   

our projected revenues, market share, expenses, net income margins, profitability and capital expenditures; and

 

   

our liquidity.

The forward-looking statements contained or incorporated by reference herein involve a number of known and unknown risks and uncertainties that could cause our future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements. You should understand that many important factors, in addition to those discussed or incorporated by reference in this prospectus, could cause our results to differ materially from those expressed in the forward-looking statements. Potential factors that could affect our results, include, in addition to others not described in this prospectus, those referenced under “Risk Factors” on page 5 of this prospectus. These are factors that we think could cause our actual results to differ materially from our expected results.

Forward-looking statements speak only as of the date on which they are made, and we undertake no obligation to update any forward-looking statements or other information contained in this prospectus, whether as a result of new information, future events or otherwise, except as may be required by law. You are advised, however, to consult any additional disclosures we make in our Annual Reports on Form 20-F and our Reports of Foreign Private Issuer on Form 6-K that are filed with the SEC. See “Risk Factors” on page 5 of this prospectus. Other factors besides those listed here could also adversely affect us. This discussion is provided as permitted by the Private Securities Litigation Reform Act of 1995.

 

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RATIO OF EARNINGS TO FIXED CHARGES

Our ratio of earnings to fixed charges in accordance with U.S. GAAP for each of the periods presented below was as follows:

 

     Three Months Ended
March 31, 2016
     Year Ended December 31,  
      2015      2014      2013      2012      2011  

Ratio of earnings to fixed charges

     14.4         9.3         11.8         4.7         5.7         12.5   

The finance subsidiaries did not have any independent operations for the relevant periods.

PRICE RANGE OF ADSs AND ORDINARY SHARES

Teva Ordinary Shares

Teva’s ordinary shares have been listed on the Tel Aviv Stock Exchange (“TASE”) since 1951. As of March 31, 2016, Teva had 914,087,572 ordinary shares outstanding, including ordinary shares underlying our outstanding ADSs.

The table below sets forth in New Israeli Shekels (“NIS”) the high and low intraday sale prices of the ordinary shares on the TASE during the periods indicated, as reported by the TASE.

 

Period

   High      Low  

Last six months:

     

July 2016 (through July 7)

     195.00         191.00   

June 2016

     210.00         190.00   

May 2016

     205.24         188.20   

April 2016

     216.11         203.60   

March 2016

     229.62         199.13   

February 2016

     245.83         209.70   

January 2016

     258.50         239.50   

Last eleven quarters:

     

Q3 2016 (through July 7)

     195.00         191.00   

Q2 2016

     255.38         188.20   

Q1 2016

     258.50         239.50   

Q4 2015

     259.30         214.70   

Q3 2015

     275.90         217.60   

Q2 2015

     267.40         220.20   

Q1 2015

     255.50         217.50   

Q4 2014

     230.90         187.00