Billionaire Blavatnik Weighs $3 Billion Lifeline to Teva

Tycoon weighing investment in flagging pharmaceutical giant

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Billionaire Len Blavatnik is weighing a $3 billion investment in ailing Israeli drugmaker Teva.

The businessman is likely to acquire a significant chunk of Teva stock if he becomes convinced that its shares are undervalued, despite its heavy financial debts. The investment would likely be made via a private issuing of shares, which would help Teva meet its net financial debt of $34.7 billion as of Q3 2017.

Blavatnik is also expected to try to acquire a share package from Allergan – which holds 9.9% of Teva – for $1.14 billion. Allergan, which sold its generics division, Actavis Generics, to Teva for $39.3 billion in August 2016, was compensated in part by an issuance of 100.3 million Teva shares, which then traded at a value of over $50 per share.

Len Blavatnik, 2010.Credit: Bloomberg

According to the agreement with Teva, Allergan was prevented from selling its Teva shares until this past August. Allergan announced last week it would sell its stake in Teva in the coming weeks.

Teva, whose market cap is $11.6 billion, reduced its sales forecast, its earnings per share and cash flow in 2017 after announcing its financial results. The expected reduction of $1.3 billion in cash flow, relative to the previous forecast made in August, stems from, among other things, tougher and earlier than expected competition from Teva’s generics rivals regarding its most profitable drug – Copaxone, which treats multiple sclerosis. The reduced cash flow will make it hard for Teva to make its debt payments to bondholders and the banks, which total a cumulative $17.5 billion for the period between 2018 and 2021.

Forbes ranks Blavatnik, 60, as the 40th wealthiest person in the world. His fortune is estimated at about $20 billion. He made his fortune with his friend Viktor Vekselberg, acquiring oil and aluminum assets that Russia was privatizing in the early 1990s. They eventually joined forces with magnate Mikhail Fridman and Rusal’s Oleg Deripaska. Having acquired Siberian oil company TNK, Blavatanik, Vekselberg and Fridman founded TNK-BP, together with British Petroleum. He sold his holdings to BP for $7 billion in 2013.

Blavatnik in turn bought Western companies, real estate and communications companies like Warner Music. He has an 18.5% stake in LyondellBasell, a petrochemical giant, through his holding company Access Industries. He is also the owner of Clal Industries, which he bought in stages from IDB and the public for 2.3 billion shekels. Clal Industries’ most prominent holding is Nesher Malt. In addition, he owns 20% of the shares in RGE, which is controlled by Aviv Giladi, which in turn holds 24% of the shares of the Reshet communications company and 51% of Israel’s Channel 10.

Access Industries declined to comment for this article.