Proxy Statement - Merger or Acquistion (preliminary) (prem14a)

Date : 08/12/2019 @ 8:33PM
Source : Edgar (US Regulatory)
Stock : Allergan plc (AGN)
Quote : 186.37  0.29 (0.16%) @ 12:59AM
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Proxy Statement - Merger or Acquistion (preliminary) (prem14a)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

 

 

Filed by the Registrant  ☒                            Filed by a Party other than the Registrant  ☐

Check the appropriate box:

  Preliminary Proxy Statement

  Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

  Definitive Proxy Statement

  Definitive Additional Materials

  Soliciting Material under Rule 14a-12

ALLERGAN PLC

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

  No fee required.

  Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)  

Title of each class of securities to which transaction applies:

 

Allergan plc ordinary shares (the “Allergan shares”)

 

  (2)  

Aggregate number of securities to which transaction applies:

 

337,362,154 Allergan securities as of August 5, 2019, which consists of: (A) 328,029,799 Allergan shares, (B) Allergan options to purchase an aggregate 6,108,800 Allergan shares, (C) 2,843,429 Allergan shares subject to outstanding restricted stock unit awards and (D) 380,126 Allergan shares subject to Allergan performance stock unit awards.

 

  (3)  

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):

 

Solely for the purpose of calculating the filing fee, the underlying value of the transaction was calculated by multiplying (x) 337,362,154, the aggregate number of securities to which the transaction applies, by (y) $160.335, representing the average of the high and low prices reported on the New York Stock Exchange for a share of Allergan plc ordinary shares on August 5, 2019.

 

  (4)  

Proposed maximum aggregate value of transaction:

 

$54,090,960,961.59

 

  (5)  

Total fee paid:

 

$6,555,824.47

 

  Fee paid previously with preliminary materials.

  Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)  

Amount Previously Paid:

 

     

  (2)  

Form, Schedule or Registration Statement No.:

 

     

  (3)  

Filing Party:

 

     

  (4)  

Date Filed:

 

     

 

 

 


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PRELIMINARY PROXY STATEMENT—SUBJECT TO COMPLETION, DATED AUGUST 12, 2019

 

 

LOGO

ALLERGAN PLC

Clonshaugh Business and Technology Park,

Coolock, Dublin D17 E400 Ireland

TRANSACTION PROPOSED—YOUR VOTE IS VERY IMPORTANT

To our Shareholders:

You are cordially invited to attend two special meetings of the shareholders of Allergan plc, referred to as “Allergan.” The first, the special Court-ordered meeting, is to be held on [                    ], 2019 at [            ] local time, at [            ], and the second, the extraordinary general meeting of shareholders, referred to as the “extraordinary general meeting,” is to be held on [                    ], 2019 at [            ] local time, at [            ], or, if the special Court-ordered meeting has not concluded by [            ] local time, as soon as possible after the conclusion or adjournment of the special Court-ordered meeting.

As previously announced, on June 25, 2019, Allergan entered into a Transaction Agreement, referred to as the “Transaction Agreement,” by and among Allergan, AbbVie Inc., a Delaware corporation, referred to as “AbbVie,” and Venice Subsidiary LLC, a Delaware limited liability company and a direct wholly owned subsidiary of AbbVie, referred to as “Acquirer Sub.” Under the terms of the Transaction Agreement, Acquirer Sub will acquire Allergan (referred to as the “acquisition” or the “transaction”) pursuant to a scheme of arrangement under Chapter 1 of Part 9 of the Irish Companies Act 2014, referred to as the “Act,” and a capital reduction under Sections 84 to 86 of the Act, which are collectively referred to as the “scheme.” As a result of the scheme, Allergan will become a wholly owned subsidiary of AbbVie.

As consideration for the acquisition, Allergan shareholders will be entitled to receive at the effective time of the scheme, referred to as the “effective time,” (i) $120.30 in cash and (ii) 0.8660 of a newly issued share of AbbVie common stock, par value $0.01 per share (the “AbbVie common stock”), in exchange for each Allergan ordinary share held by such Allergan shareholders, which together are referred to as the “scheme consideration.” If the payment of the scheme consideration would result in the issuance of AbbVie common stock in excess of 19.99% of the aggregate shares of AbbVie common stock outstanding immediately prior to the completion of the acquisition (the “completion”) (as reasonably determined by AbbVie) (the “share cap”), the exchange ratio of 0.8660 will be reduced by the smallest number (rounded to the nearest 0.0001) that causes the total number of shares of AbbVie common stock issuable in the acquisition to not exceed the share cap, and the cash consideration described above would then be increased by an amount in cash equal to that number multiplied by the ten (10) day volume-weighted average price of AbbVie common stock starting with the opening of trading on the eleventh trading day prior to the date of completion (the “completion date”) to the closing of trading on the second to last trading day prior to the completion date.

Allergan equity awards will be treated as set forth in the Transaction Agreement, such that (i) each Allergan option and each Allergan restricted stock unit award that is outstanding immediately prior to the effective time will be substituted by AbbVie with a corresponding award relating to shares of AbbVie common stock, with the number of shares of AbbVie common stock subject to such award and, if applicable, the exercise price applicable to such award, determined in accordance with the formulas set forth in the Transaction Agreement, and (ii) each Allergan performance stock unit award that is outstanding as of immediately prior to the effective time will be substituted by AbbVie with an AbbVie restricted stock unit award that vests based on the holder’s continued service following the effective time and relates to a number of shares of AbbVie common stock determined in accordance with the formula set forth in the Transaction Agreement, in each case, as further described below.


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You are being asked to vote on a proposal to approve the scheme at both special meetings, as well as additional proposals being presented at the extraordinary general meeting that shareholders must approve in order to properly implement the scheme and upon which approval of the acquisition is conditioned. The scheme is also subject to approval by the Irish High Court. More information about the transaction and the proposals is contained in the accompanying proxy statement. We urge all Allergan shareholders to read the accompanying proxy statement, including the annexes  and the documents incorporated by reference therein, carefully and in their entirety. In particular, we urge you to read carefully “ Risk Factors beginning on page 19 of the accompanying proxy statement.

Your proxy is being solicited by the members of the board of directors of Allergan entitled to solicit your proxy under the Irish Takeover Rules.

After careful consideration, the members of the board of directors of Allergan entitled to make a recommendation in this matter under the Irish Takeover Rules (additional information regarding interests in the transaction of the directors entitled to make such recommendation may be found in “ The Transaction—Interests of Certain Persons in the Transaction ” beginning on page 61 of the accompanying proxy statement, and each subsequent reference to the Allergan board of directors is intended to refer to the members so entitled) have unanimously determined that the Transaction Agreement and the transactions contemplated by the Transaction Agreement, including the scheme, are fair to and in the best interests of Allergan and its shareholders and that the terms of the scheme are fair and reasonable. The Allergan board of directors recommends unanimously that you vote “FOR” all proposals. In considering the recommendation of the Allergan board of directors, you should be aware that certain directors and executive officers of Allergan have interests in the proposed transaction that are in addition to, or different from, any interests they might have as shareholders. See “ The Transaction—Interests of Certain Persons in the Transaction ” beginning on page 61 for more information. Your vote is very important. Please vote as soon as possible, whether or not you plan to attend the special meetings, by following the instructions in the accompanying proxy statement.

On behalf of the Allergan board of directors, thank you for your consideration and continued support.

Very truly yours,

 

Brenton L. Saunders

 

Chairman, President and Chief Executive Officer

  

Christopher J. Coughlin

 

Lead Independent Director

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued in connection with the transaction or determined if the accompanying proxy statement is accurate or complete. Any representation to the contrary is a criminal offense.

For the avoidance of doubt, the accompanying proxy statement is not intended to be and is not a prospectus for the purposes of the Companies Act 2014, Regulation (EU) 2017/1129, the European Union (Prospectus) Regulations 2019 or the Central Bank (Investment Market Conduct) Rules 2019, and the Central Bank of Ireland has not approved this document.

The accompanying proxy statement is dated [                    ], 2019, and is first being mailed to shareholders of Allergan on or about [                    ], 2019.


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ADDITIONAL INFORMATION

The accompanying proxy statement incorporates by reference important business and financial information about Allergan from documents that are not included in or delivered with the proxy statement. This information is available to you without charge upon your written or oral request. You can obtain the documents incorporated by reference in the proxy statement by requesting them in writing or by telephone from Allergan at the following address, email or telephone number:

Allergan plc

5 Giralda Farms

Madison, New Jersey 07940

Attn: Investor Relations

(862) 261-7000

investor.relations@allergan.com

In addition, if you have questions about the transaction or the special meetings, or if you need to obtain copies of the accompanying proxy statement, proxy cards or other documents incorporated by reference in the proxy statement, you may contact the contact listed below. You will not be charged for any of the documents you request.

 

 

LOGO

1407 Broadway – 27th Floor

New York, New York 10018

(212) 929-5500 (Call Collect)

or

Call Toll-Free (800) 322-2885

Email: proxy@mackenziepartners.com

If you would like to request documents, please do so by [                    ], 2019 in order to receive them before the special meetings.

For a more detailed description of the information incorporated by reference in the accompanying proxy statement and how you may obtain it, see “ Where You Can Find More Information ” beginning on page 149 of the accompanying proxy statement.

 


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LOGO

ALLERGAN PLC

Clonshaugh Business and Technology Park,

Coolock, Dublin D17 E400 Ireland

NOTICE OF COURT MEETING OF SHAREHOLDERS

IN THE HIGH COURT No. [2019/[                ] [                ]]

IN THE MATTER OF ALLERGAN PLC

– and –

IN THE MATTER OF THE COMPANIES ACT 2014

NOTICE IS HEREBY GIVEN that by an Order dated [                    ], 2019, made in the above matters, the Irish High Court has directed a meeting (referred to as the “special Court-ordered meeting”) to be convened of the holders of the Scheme Shares (as defined in the proposed scheme of arrangement that is included in the document of which this Notice forms a part) of Allergan plc (“Allergan”) for the purpose of considering and, if thought fit, approving a resolution to approve (with or without modification) a scheme of arrangement pursuant to Chapter 1 of Part 9 of the Companies Act 2014 proposed to be made between Allergan and the holders of the Scheme Shares (referred to as the “scheme” or “scheme of arrangement”) (and that such meeting will be held at [            ], on [                    ] 2019, at [            ] (Irish time)), at which place and time all holders of the Scheme Shares entitled to vote thereat are invited to attend; such resolution being in the following terms:

“That the scheme in its original form or with or subject to any modification(s), addition(s) or condition(s) approved or imposed by the High Court be agreed to.”

A copy of the scheme of arrangement and a copy of the explanatory statement required to be furnished pursuant to Section 452 of the Companies Act 2014 are included in the document of which this Notice forms a part.

Scheme Shareholders (as defined in the proposed scheme of arrangement that is included in the document of which this Notice forms a part) may vote in person at the special Court-ordered meeting or they may appoint another person, whether a member of Allergan or not, as their proxy to attend, speak and vote in their stead. A white form of proxy for use at the special Court-ordered meeting is enclosed with this Notice. Completion and return of a form of proxy will not preclude a Scheme Shareholder from attending and voting in person at the special Court-ordered meeting, or any adjournment thereof, if that shareholder wishes to do so. Any alteration to the form of proxy must be initialed by the person who signs it.

It is requested that forms of proxy duly completed and signed, together with any power of attorney, if any, under which it is signed, be submitted to Allergan’s inspector of election, [            ] no later than 3:59 p.m. (Eastern Time in the U.S.) on the day before the special Court-ordered meeting but, if forms are not so submitted, they may be handed to the Chairman of the special Court-ordered meeting before the start of the special Court-ordered meeting and will still be valid.

Scheme Shareholders may also submit a proxy or proxies via the internet by accessing the website www.proxyvote.com or vote by telephone by calling the toll-free telephone number listed on www.proxyvote.com or on the voter instruction form or proxy card anytime up to 3:59 p.m. (Eastern Time in the U.S.) on [            ]. All proxies will be forwarded to Allergan’s registered address electronically.


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In the case of joint holders, the vote of the senior holder who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the vote(s) of the other joint holder(s) and, for this purpose, seniority will be determined by the order in which the names stand in the register of members of Allergan in respect of the joint holding.

Entitlement to attend and vote at the meeting, or any adjournment thereof, and the number of votes which may be cast, will be determined by reference to the register of members of Allergan as of [            ] p.m. (Eastern Time in the U.S.) on [                    ] 2019, which is referred to as the “Voting Record Time.” In each case, changes to the register of members of Allergan after such time shall be disregarded for the purposes of being entitled to vote.

If the form of proxy is properly executed and returned to Allergan’s inspector of election, it will be voted in the manner directed by the shareholder executing it, or if no directions are given, it will be voted at the discretion of the Chairman of the special Court-ordered meeting or any other person duly appointed as proxy by the shareholder.

In the case of a corporation, the form of proxy must be either under its Common Seal or under the hand of an officer or attorney, duly authorized.

By the said Order, the Irish High Court has appointed [            ] or, failing [him] [her], [            ], or, failing [him] [her], [            ], to act as Chairman of said meeting and has directed the Chairman to report the result thereof to the Irish High Court.

Subject to the approval of the resolution proposed at the meeting convened by this notice, the requisite resolutions to be proposed at the extraordinary general meeting of Allergan convened for [                    ] 2019 and the satisfaction of the other conditions to the completion of the scheme of arrangement, it is anticipated that the Irish High Court will order that the hearing of the application to sanction said scheme of arrangement will take place in [            ] [20[19][20]].

Terms shall have the same meaning in this Notice as they have in the proxy statement accompanying this Notice.

Said scheme of arrangement will be subject to the subsequent sanction of the Irish High Court.

Issued Shares and Total Voting Rights

The total number of issued Scheme Shares held by Scheme Shareholders as of the Voting Record Time (as defined in the proposed scheme of arrangement that is included in the document of which this Notice forms a part) entitled to vote at the special Court-ordered meeting is [            ]. The resolution at the special Court-ordered meeting shall be decided on a poll. Every holder of an Allergan ordinary share (excluding AbbVie and its affiliates, to the extent they hold Allergan ordinary shares) as of the Voting Record Time will have one vote for every Allergan ordinary share carrying voting rights of which he, she or it is the holder. A holder of an Allergan ordinary share as of the Voting Record Time (whether present in person or by proxy) who is entitled to more than one vote need not use all his, her or its votes or cast all his, her or its votes in the same way. In order for the resolution at the special Court-ordered meeting to pass, those voting to approve the scheme must: (a) represent a simple majority (being more than fifty percent (50%)) in number of the shareholders of record of Allergan ordinary shares as of the Voting Record Time present and voting (in person or by proxy), and (b) also represent three-fourths (75%) or more in value of the Allergan ordinary shares held by such holders as of the Voting Record Time, present and voting (in person or by proxy).

YOUR VOTE IS IMPORTANT

IT IS IMPORTANT THAT AS MANY VOTES AS POSSIBLE ARE CAST AT THE SPECIAL COURT-ORDERED MEETING (WHETHER IN PERSON OR BY PROXY) SO THAT THE IRISH


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HIGH COURT CAN BE SATISFIED THAT THERE IS A FAIR AND REASONABLE REPRESENTATION OF ALLERGAN SHAREHOLDER OPINION. TO ENSURE YOUR REPRESENTATION AT THE SPECIAL COURT-ORDERED MEETING, YOU ARE REQUESTED TO COMPLETE, SIGN AND DATE THE ENCLOSED FORM OF PROXY AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE POSTAGE PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE OR BY INTERNET OR TELEPHONE IN THE MANNER PROVIDED ABOVE. IF YOU ATTEND THE SPECIAL COURT-ORDERED MEETING, YOU MAY VOTE IN PERSON EVEN IF YOU HAVE RETURNED A COMPLETED FORM OF PROXY.

Dated [                ] 2019

Arthur Cox

Ten Earlsfort Terrace

Dublin 2

Ireland

Solicitors for Allergan

 


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LOGO

ALLERGAN PLC

Clonshaugh Business and Technology Park,

Coolock, Dublin D17 E400 Ireland

NOTICE OF EXTRAORDINARY GENERAL MEETING OF ALLERGAN PLC

NOTICE IS HEREBY GIVEN that an EXTRAORDINARY GENERAL MEETING of Allergan plc (referred to as “Allergan”) will be held at [            ], on [                    ] 2019, at [            ] (local time) (or, if the special Court-ordered meeting has not concluded by [            ] local time, as soon as possible after the conclusion or adjournment of the special Court-ordered meeting (as defined in the scheme of arrangement that is included in the document of which this Notice forms a part (the “Scheme of Arrangement”))) for the purpose of considering and, if thought fit, passing the following resolutions of which resolutions 1, 3, 5 and 6 will be proposed as ordinary resolutions and resolutions 2 and 4 as special resolutions:

 

1.

Ordinary Resolution: To Approve the Scheme of Arrangement

That, subject to the approval by the requisite majorities of the Scheme of Arrangement at the special Court-ordered meeting, the Scheme of Arrangement (a copy of which has been produced to this meeting and for the purposes of identification signed by the Chairman thereof) in its original form or with or subject to any modification, addition or condition approved or imposed by the Irish High Court be approved and the directors of Allergan be authorized to take all such action as they consider necessary or appropriate for carrying the Scheme of Arrangement into effect.

 

2.

Special Resolution: Cancellation of Cancellation Shares Pursuant to the Scheme of Arrangement

That, subject to the passing of resolution 1 (above) and to the confirmation of the Irish High Court pursuant to Section 84 of the Companies Act 2014 and pursuant to Article 48 of Allergan’s articles of association, the issued capital of Allergan be reduced by cancelling and extinguishing all the Cancellation Shares (as defined in the Scheme of Arrangement) but without thereby reducing the authorized share capital of Allergan.

 

3.

Ordinary Resolution: Directors’ Authority to Allot Securities and Application of Reserves

That, subject to the passing of resolutions 1 and 2 (above):

 

  (i)

the directors of Allergan be and are hereby generally authorized pursuant to and in accordance with Section 1021 of the Companies Act 2014 to give effect to this resolution and accordingly to effect the allotment of the New Allergan Shares (as defined in the Scheme of Arrangement) referred to in paragraph (ii) below provided that (a) this authority shall expire on September 25, 2020, (b) the maximum aggregate nominal amount of shares which may be allotted hereunder shall be an amount equal to the nominal value of the Cancellation Shares (as defined in the Scheme of Arrangement) and (c) this authority shall be without prejudice to any other authority under said Section 1021 previously granted before the date on which this resolution is passed; and

 

  (ii)

forthwith upon the reduction of capital referred to in resolution 2 above taking effect, the reserve credit arising in the books of account of Allergan as a result of the cancellation of the Cancellation Shares be applied in paying up in full at par such number of new Allergan Shares as shall be equal to the aggregate of the number of Cancellation Shares cancelled pursuant to resolution 2 above, such new Allergan Shares to be allotted and issued to Venice Subsidiary LLC (“Acquirer Sub”) and/or its nominee(s) in the manner described in the Scheme of Arrangement, credited as fully paid up and free from all liens, charges, encumbrances, rights of pre-emption and any other third-party rights of any nature whatsoever.


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4.

Special Resolution: Amendment to Articles

That, subject to the Scheme becoming effective, the articles of association of Allergan be amended by adding the following new Article 171:

171. Scheme of Arrangement

 

  (a)

In these Articles, the “Scheme” or the “Scheme of Arrangement” means the scheme of arrangement dated [    ] between the Company and the holders of the scheme shares (which comprise the ordinary shares of the Company that are cancelled or transferred under the Scheme) (the “Scheme Shares”) under Chapter 1 of Part 9 of the Companies Act 2014 in its original form or with or subject to any modification, addition or condition approved or imposed by the Irish High Court and expressions defined in the Scheme and (if not so defined) in the document containing the explanatory statement circulated with the Scheme under Section 452 of the Companies Act 2014 shall have the same meanings in this Article 171.

 

  (b)

Notwithstanding any other provision of these Articles, if the Company allots and issues any ordinary shares (other than to Venice Subsidiary LLC (“Acquirer Sub”) and/or its nominee(s)) on or after the Voting Record Time (as defined in the Scheme of Arrangement) and prior to the Scheme Record Time (as defined in the Scheme of Arrangement), such shares shall be allotted and issued subject to the terms of the Scheme and the holder or holders of those shares shall be bound by the Scheme accordingly.

 

  (c)

Notwithstanding any other provision of these Articles, if any new ordinary shares of the Company are allotted or issued to any person (a “new member”) (other than to Acquirer Sub and/or its nominee(s)) on or after the Scheme Record Time, the new member shall, provided that the Scheme has become effective, have such shares (the “Post-Scheme Shares”) transferred immediately, free of all encumbrances, to Acquirer Sub and/or its nominee(s) as Acquirer Sub and/or its nominee(s) may direct in consideration of and conditional on the payment by Acquirer Sub to the new member of the consideration to which the new member would have been entitled under the terms of the Scheme had such ordinary shares transferred to Acquirer Sub and/or its nominee(s) hereunder been Scheme Shares at the Scheme Record Time.

 

  (d)

On any reorganisation of, or material alteration to, the share capital of the Company or AbbVie Inc. (“AbbVie”) (including, without limitation, any subdivision and/or consolidation), the value of the consideration per Post-Scheme Share under paragraph (c) above shall be adjusted by the Company and AbbVie in such manner as the auditors of the Company or an independent investment bank selected by the Company and AbbVie may determine to be fair and reasonable to reflect such reorganisation or alteration. References in this article to shares shall, following such adjustment, be construed accordingly.

 

  (e)

Fractions of shares of AbbVie common stock will not be issued or transferred to new members pursuant to this Article 171. Instead, new members shall receive in lieu of such fractional entitlements, cash in an amount in U.S. dollars (rounded down to the nearest cent) equal to such fractional amount multiplied by the last reported sale price of shares of AbbVie common stock on NYSE (as reported in The Wall Street Journal or, if not reported therein, in another authoritative source selected by AbbVie) on the last Business Day prior to the Effective Date.

 

  (f)

In order to give effect to any such transfer required by this Article 171, the Company may appoint any person to execute and deliver a form of transfer on behalf of or as attorney for, the new member in favour of Acquirer Sub and/or its nominee(s) without the need for any further action being required to give effect thereto. Pending the registration of Acquirer Sub and/or its nominee(s) as a holder of any share to be transferred under this Article 171, the new member shall not be entitled to exercise any rights attaching to any such share unless so agreed by Acquirer Sub and Acquirer Sub shall be irrevocably empowered to appoint a person nominated by Acquirer Sub to act as attorney or agent on behalf of any holder of that share in accordance with any directions Acquirer Sub may give in relation to any dealings with or disposal of that share (or any interest in it), the exercise of any rights attached to it or receipt of any distribution or other benefit accruing or payable in respect of it, and any holder(s)

 

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  of that share must exercise all rights attaching to it in accordance with the directions of Acquirer Sub. The Company shall not be obliged to issue a certificate to the new member for any such share.

 

  (g)

In addition to the power in Article 154, the distributable reserve arising in the books of account of the Company as a result of the cancellation of the Cancellation Shares (as defined in the Scheme of Arrangement) may be applied by the Board at such time as the Board shall determine in paying up in full at par such number of New Allergan Shares (as defined in the Scheme of Arrangement) as shall be equal to the aggregate of the number of Cancellation Shares, such New Allergan Shares to be allotted and issued to Acquirer Sub and/or its nominee(s) in the manner described in the Scheme, credited as fully paid up and free from all liens, charges, encumbrances, rights of pre-emption and any other third-party rights of any nature whatsoever.

 

5.

Ordinary Resolution (non-binding, advisory): Approval of Specified Compensatory Arrangements between Allergan and its Named Executive Officers

That, on a non-binding, advisory basis, specified compensatory arrangements between Allergan and its named executive officers relating to the transaction (as more particularly described in the section of the accompanying proxy statement captioned “ Interests of Certain Persons in the Transaction ” beginning on page 61) be approved.

 

6.

Ordinary Resolution: Adjournment of the Extraordinary General Meeting

That any motion by the Chairman to adjourn the extraordinary general meeting, or any adjournments thereof, to another time and place if necessary or appropriate to solicit additional proxies if there are insufficient votes at the time of the extraordinary general meeting to approve resolutions 1 through 4, be approved.

 

By order of the Board    Allergan plc
EVP and Chief Legal Officer and Corporate Secretary    Clonshaugh Business and Technology Park,
Coolock, Dublin, D17 E400, Ireland
A. Robert D. Bailey   
Dated: [                    ] 2019   

Notes:

 

1.

Each Allergan shareholder is entitled to attend, speak and vote at the extraordinary general meeting or is entitled to appoint a proxy to attend, speak and vote in his or her place (using the form of proxy provided or in the form in section 184 of the Companies Act 2014). A proxy need not be a member of Allergan.

 

2.

Entitlement to attend, speak and vote at the extraordinary general meeting, or any adjournment thereof, and the number of votes which may be cast, will be determined by reference to the register of members of Allergan as of [            ] (Eastern Time in the U.S.) on [                    ] 2019, which is referred to as the “Voting Record Time.” In each case, changes to the register of members of Allergan after such time will be disregarded for the purposes of being entitled to vote.

 

3.

This document is available at www.materials.proxyvote.com.

 

4.

You may vote your shares in person at the extraordinary general meeting. Whether or not you plan to attend the extraordinary general meeting, we encourage you to vote the shares: (i) by accessing the internet site www.proxyvote.com up until 3:59 p.m. Eastern Time (in the U.S.) on [            ], (ii) by calling the toll-free telephone number 1-800-690-6903 to submit your form of proxy up until 3:59 p.m. Eastern Time (in the U.S.) on [            ], or (iii) by marking, dating and signing any form of proxy or voter instruction form provided to you and returning it in the accompanying postage prepaid envelope as quickly as possible, to be received by 3:59 p.m. Eastern Time (in the U.S.) on [            ] (which will be forwarded to Allergan’s registered address electronically).

 

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5.

It is requested that forms of proxy duly completed and signed, together with any power of attorney, if any, under which it is signed, be submitted to Allergan’s inspector of election, in accordance with Note 4. If forms are not so submitted, they may be handed to the Chairman of the extraordinary general meeting before the start of the extraordinary general meeting and will still be valid.

 

6.

In the case of joint holders, the vote of the senior member who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the votes of the other joint holders of record and, for this purpose, seniority will be determined by the order in which the names appear in the Allergan register of members in respect of the joint holding.

 

 

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TABLE OF CONTENTS

 

QUESTIONS AND ANSWERS ABOUT THE TRANSACTION AND THE SPECIAL MEETINGS

     1  

SUMMARY

     9  

Information about the Companies

     9  

The Transaction

     9  

Structure of the Transaction

     10  

Scheme Consideration to Allergan Shareholders

     10  

Treatment of Allergan Options and Allergan Share Awards

     10  

Recommendation of the Allergan Board of Directors and Allergan’s Reasons for the Transaction

     11  

Opinion of J.P. Morgan Securities LLC

     12  

Interests of Certain Persons in the Transaction

     12  

Material Tax Consequences of the Proposed Transaction

     13  

No Dissenters’ Rights

     13  

Regulatory Approvals Required

     13  

Conditions to the Completion of the Acquisition

     14  

Termination of the Transaction Agreement

     16  

Expenses Reimbursement Agreement

     17  

Financing Relating to the Transaction

     17  

RISK FACTORS

     19  

Risks Relating to the Transaction

     19  

Risks Relating to the Combined Company Following the Transaction

     23  

SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA OF ABBVIE

     26  

SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA OF ALLERGAN

     27  

SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA

     29  

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

     30  

PART 1—THE TRANSACTION AND THE SPECIAL MEETINGS

     33  

THE SPECIAL MEETINGS OF ALLERGAN’S SHAREHOLDERS

     33  

Overview

     33  

Date, Time and Place of the Special Meetings

     33  

Attendance

     33  

Proposals

     33  

Record Date; Outstanding Ordinary Shares; Ordinary Shares Entitled to Vote

     34  

Quorum

     34  

Ordinary Share Ownership and Voting by Allergan’s Directors and Officers

     34  

Vote Required; Recommendation of the Allergan Board of Directors

     35  

Voting Your Ordinary Shares

     37  

Voting Ordinary Shares Held in Street Name

     37  

Revoking Your Proxy

     38  

Costs of Solicitation

     38  

 

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TABLE OF CONTENTS

(cont.)

 

Other Business

     38  

Adjournment

     38  

Assistance

     38  

THE TRANSACTION

     39  

The Acquisition

     39  

Background of the Transaction

     40  

Recommendation of the Allergan Board of Directors and Allergan’s Reasons for the Transaction

     45  

Opinion of J.P. Morgan Securities LLC

     49  

Allergan Unaudited Prospective Financial Information

     57  

Financing

     60  

Interests of Certain Persons in the Transaction

     61  

Quantification of Payments and Benefits to Allergan’s Named Executive Officers

     65  

AbbVie’s Intentions Regarding AbbVie and Allergan

     67  

Regulatory Approvals Required

     68  

Payment of Consideration

     69  

NO DISSENTERS’ RIGHTS

     70  

MATERIAL TAX CONSEQUENCES OF THE PROPOSED TRANSACTION

     71  

Irish Tax Considerations

     71  

Material U.S. Federal Income Tax Considerations

     72  

DELISTING AND DEREGISTRATION OF ALLERGAN ORDINARY SHARES

     75  

INFORMATION ABOUT THE COMPANIES

     76  

THE TRANSACTION AGREEMENT

     77  

Structure of the Transaction

     77  

Closing of the Transaction

     77  

Scheme Consideration to Allergan Shareholders

     77  

Treatment of Allergan Options and Allergan Share Awards

     77  

Exchange of Allergan Ordinary Shares

     78  

Representations and Warranties

     79  

Covenants and Agreements

     81  

Shareholders Meetings and Recommendations

     82  

Third-Party Acquisition Proposals

     82  

Conditions to the Completion of the Acquisition

     92  

Reverse Termination Payment

     95  

Amendment and Waiver

     95  

EXPENSES REIMBURSEMENT AGREEMENT

     97  

FINANCING RELATING TO THE TRANSACTION

     99  

Bridge Credit Agreement

     99  

Term Loan Credit Agreement

     99  

 

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TABLE OF CONTENTS

(cont.)

 

Summary of Terms of the Bridge Credit Agreement and the Term Loan Credit Agreement

     99  

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     101  

AbbVie Unaudited Pro Forma Condensed Combined Balance Sheet

     103  

AbbVie Unaudited Pro Forma Condensed Combined Statement of Earnings

     104  

AbbVie Unaudited Pro Forma Condensed Combined Statement of Earnings

     105  

SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS

     113  

Stock Ownership of Certain Beneficial Owners

     113  

Stock Ownership of Directors and Executive Officers

     113  

ALLERGAN SHAREHOLDER VOTE ON SPECIFIED COMPENSATORY ARRANGEMENTS

     115  

Advisory Vote on Golden Parachute Compensation

     115  

Required Vote

     115  

Recommendation

     115  

DESCRIPTION OF ABBVIE CAPITAL STOCK

     116  

General

     116  

Common Stock

     116  

Preferred Stock

     116  

Anti-Takeover Effects of Various Provisions of Delaware Law and AbbVie’s Amended and Restated Certificate of Incorporation and By-Laws

     116  

Limitations on Liability, Indemnification of Officers and Directors, and Insurance

     118  

Exclusive Forum

     118  

Authorized but Unissued Shares

     119  

COMPARISON OF THE RIGHTS OF ABBVIE STOCKHOLDERS AND ALLERGAN SHAREHOLDERS

     120  

FUTURE SHAREHOLDER PROPOSALS

     147  

HOUSEHOLDING OF PROXY STATEMENT

     148  

WHERE YOU CAN FIND MORE INFORMATION

     149  

PART 2—EXPLANATORY STATEMENT

     152  

PART 3—THE SCHEME OF ARRANGEMENT

     170  

PART 4—ADDITIONAL INFORMATION

     178  

ALLERGAN PROFIT FORECAST

     212  

ABBVIE PROFIT FORECAST

     213  

MERGER BENEFIT STATEMENT

     215  

ANNEX A: TRANSACTION AGREEMENT

     A-1  

ANNEX B: CONDITIONS OF THE ACQUISITION AND THE SCHEME

     B-1  

ANNEX C: EXPENSES REIMBURSEMENT AGREEMENT

     C-1  

ANNEX D: OPINION OF J.P. MORGAN SECURITIES LLC

     D-1  

 

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QUESTIONS AND ANSWERS ABOUT THE TRANSACTION AND THE SPECIAL MEETINGS

The following questions and answers are intended to address briefly some commonly asked questions regarding the transaction and each special meeting. These questions and answers highlight only some of the information contained in this proxy statement. They may not contain all the information that is important to you. You should read carefully this entire proxy statement, including the annexes and the documents incorporated by reference into this proxy statement, to understand fully the proposed transactions and the voting procedures for the special meetings. See “Where You Can Find More Information” beginning on page 149. Unless otherwise specified, all references in this proxy statement to “Allergan” refer to Allergan plc, a public limited company incorporated in Ireland; all references in this proxy statement to “AbbVie” refer to AbbVie Inc., a Delaware corporation; all references in this proxy statement to Acquirer Sub refer to Venice Subsidiary LLC, a Delaware limited liability company; all references to the “Transaction Agreement” refer to the Transaction Agreement, dated as of June 25, 2019, by and among Allergan, AbbVie and Acquirer Sub, a copy of which is included as Annex A to this proxy statement; all references to the “conditions appendix” refer to the conditions to the acquisition and the scheme, a copy of which is included as Annex B to this proxy statement; and all references to the “expenses reimbursement agreement” refer to the Expenses Reimbursement Agreement, dated as of June 25, 2019, by and between Allergan and AbbVie, which is included as Annex C to this proxy statement. Unless otherwise indicated, all references to “dollars” or “$” in this proxy statement are references to U.S. dollars. If you are in any doubt about this transaction you should consult an independent financial advisor who, if you are taking advice in Ireland, is authorized or exempted by the Investment Intermediaries Act 1995 (as amended), or the European Union (Markets in Financial Instruments) Regulations 2017 (S.I. No. 375 of 2017).

 

Q:

Why am I receiving this proxy statement?

 

A:

Allergan, AbbVie and Acquirer Sub have entered into the Transaction Agreement, pursuant to which Acquirer Sub will acquire Allergan by means of a “scheme of arrangement,” or “scheme,” which is referred to in this proxy statement as the “acquisition.”

The Irish High Court has ordered the convening of a special Court-ordered meeting of Allergan shareholders in order to obtain shareholder approval of the scheme of arrangement, which is referred to as the “special Court-ordered meeting.” At [    ] on [    ], 2019, or, if the special Court-ordered meeting has not concluded by [    ] local time, as soon as possible after the conclusion or adjournment of the special Court-ordered meeting, Allergan will hold an extraordinary general meeting in order to obtain shareholder approval of the resolutions necessary to implement the scheme of arrangement and related resolutions. The special Court-ordered meeting and the extraordinary general meeting are referred to collectively as the “special meetings.”

It will not be possible to complete the acquisition unless the requisite Allergan shareholder approvals described above are obtained at each special meeting. However, as described below, the acquisition is not conditioned on approval of certain additional matters being presented at the extraordinary general meeting.

We have included in this proxy statement important information about the acquisition, the Transaction Agreement (a copy of which is attached as Annex A), the conditions appendix (a copy of which is attached as Annex B), the expenses reimbursement agreement (a copy of which is attached as Annex C) and the Allergan special meetings. You should read this information carefully and in its entirety. If you are a record holder, the enclosed voting materials allow you to vote your shares without attending each or either special meeting by granting a proxy or voting your shares by mail, telephone or over the internet. If you hold your shares through a bank, broker or other nominee, you should follow the instructions provided by your bank, broker or other nominee in order to instruct them how to vote such shares.

 

Q:

When and where will each special meeting be held?

 

A:

The special Court-ordered meeting will be held at the [    ], on [    ], 2019, at [    ], local time.

 

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The extraordinary general meeting will be held at [    ], on [    ], 2019, at [    ], local time or, if the special Court-ordered meeting has not concluded by [    ] local time, as soon as possible after the conclusion of the special Court-ordered meeting.

 

Q:

What will the Allergan shareholders receive as consideration in the acquisition?

 

A:

As consideration for the acquisition, Allergan shareholders will be entitled to receive at the effective time (i) $120.30 in cash and (ii) 0.8660 of a newly issued share of AbbVie common stock, in exchange for each Allergan ordinary share held by such Allergan shareholders. If the payment of the scheme consideration would result in the issuance of AbbVie common stock in excess of 19.99% of the aggregate shares of AbbVie common stock outstanding immediately prior to the completion (as reasonably determined by AbbVie) (referred to as the “share cap”), the exchange ratio of 0.8660 will be reduced by the smallest number (rounded to the nearest 0.0001) that causes the total number of shares of AbbVie common stock issuable in the acquisition to not exceed the share cap, and the cash consideration described above would then be increased by an amount in cash equal to that number multiplied by the ten (10) day volume-weighted average price of AbbVie common stock starting with the opening of trading on the eleventh day prior to the completion date to the closing of trading on the second to last trading day prior to the completion date.

Allergan shareholders will not receive any fractional shares of AbbVie common stock as scheme consideration. Instead, fractional shares will be aggregated and sold in the market by the exchange agent, with the net proceeds of any such sale distributed in cash pro rata to the Allergan shareholders whose fractional entitlements have been sold.

Allergan equity awards will be treated as set forth in the Transaction Agreement, such that (i) each Allergan option and each Allergan restricted stock unit award that is outstanding immediately prior to the effective time will be substituted by AbbVie with a corresponding award relating to shares of AbbVie common stock, with the number of shares of AbbVie common stock subject to such award and, if applicable, the exercise price applicable to such award, determined in accordance with the formulas set forth in the Transaction Agreement and (ii) each Allergan performance stock unit award that is outstanding as of immediately prior to the effective time will be substituted by AbbVie with an AbbVie restricted stock unit award that vests based on the holder’s continued service following the effective time and relates to a number of shares of AbbVie common stock determined in accordance with the formula set forth in the Transaction Agreement, in each case as further described below.

 

Q:

What proposals are being voted on at each Allergan special meeting and what shareholder vote is required to approve those proposals?

 

A:

Special Court-Ordered Meeting

Allergan shareholders are being asked to vote on a proposal to approve the scheme at both the special Court-ordered meeting and at the extraordinary general meeting. The vote required for such proposal is different at each of the meetings, however. As set out in full under the section entitled “ Part 2—Explanatory Statement—Consents and Special Meetings ” beginning on page 154, in order for the resolution at the special Court-ordered meeting to pass, those voting to approve the scheme must: (a) represent a simple majority (being more than fifty percent (50%)) in number of the Allergan shareholders of record as of the Voting Record Time, present and voting (in person or by proxy), and (b) also represent three-fourths (75%) or more in value of the Allergan ordinary shares held by such holders as of the Voting Record Time, present and voting (in person or by proxy).

Because the vote required to approve the proposal at the special Court-ordered meeting is based on votes properly cast at the meeting, and because abstentions and broker non-votes are not considered votes properly cast, abstentions and broker non-votes, along with failures to vote, will have no effect on such proposal.

 

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The acquisition is conditioned on approval of the scheme at the special Court-ordered meeting.

Extraordinary General Meeting

Set forth below is a table summarizing certain information with respect to the resolutions to be voted on at the extraordinary general meeting:

 

Extraordinary
General
Meeting
Resolution #

  

Resolution

  

Ordinary or
Special
Resolution?

  

Transaction
Conditioned
on Approval of
Resolution?

1    Approve the scheme of arrangement and authorize the directors of Allergan to take all such actions as they consider necessary or appropriate for carrying the scheme of arrangement into effect.    Ordinary    Yes
2    Approve the cancellation of any Allergan ordinary shares in issue at 11:59 p.m., Irish time, on the day before the Irish High Court hearing to sanction the scheme (excluding, in any case, any Allergan ordinary shares which are held from time to time by AbbVie, Acquirer Sub or any other subsidiary of AbbVie, if any).    Special    Yes
3    Authorize the directors of Allergan to allot and issue new Allergan shares, fully paid up, to Acquirer Sub and/or its nominee(s) in connection with effecting the scheme.    Ordinary    Yes
4    Amend the articles of association of Allergan so that any ordinary shares of Allergan that are issued on or after the Voting Record Time (as defined in the scheme of arrangement) to persons other than Acquirer Sub or its nominees will either be subject to the terms of the scheme or will be immediately and automatically acquired by Acquirer Sub and/or its nominee(s) for the scheme consideration.    Special    Yes
5    Approve, on a non-binding, advisory basis, specified compensatory arrangements between Allergan and its named executive officers relating to the transaction.    Ordinary    No
6    Approve any motion by the Chairman to adjourn the extraordinary general meeting, or any adjournments thereof, to solicit additional proxies in favor of the approval of the resolutions if there are insufficient votes at the time of the extraordinary general meeting to approve resolutions 1 through 4.    Ordinary    No

At the extraordinary general meeting, the requisite approval of each of the resolutions depends on whether it is an “ordinary resolution” (resolutions 1, 3, 5 and 6), which requires the approval of at least a majority of the votes cast by the holders of Allergan ordinary shares present and voting, either in person or by proxy, or a “special resolution” (resolutions 2 and 4), which requires the approval of at least seventy-five percent (75%) of the votes cast by the holders of Allergan ordinary shares present and voting, either in person or by proxy.

For all the resolutions, because the votes required to approve such resolutions are based on votes properly cast at the extraordinary general meeting, and because abstentions and broker non-votes are not considered votes properly cast, abstentions and broker non-votes, along with failures to vote, will have no effect on the resolutions.

As of the Voting Record Time, the Allergan directors and executive officers had the right to vote approximately [    ] percent ([    ]%) of the Allergan ordinary shares then outstanding and entitled to vote at

 

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the special Court-ordered meeting and the extraordinary general meeting. It is expected that Allergan’s directors and executive officers will vote “FOR” each of the proposals at the special Court-ordered meeting and each of the proposals at the extraordinary general meeting, although none of them have entered into any agreement requiring them to do so.

 

Q:

Why are there two special meetings?

 

A:

Irish law requires that two separate shareholder meetings be held, the special Court-ordered meeting and the extraordinary general meeting. Both meetings are necessary to cause the scheme of arrangement to become effective.

At the special Court-ordered meeting, Allergan shareholders (excluding AbbVie and its affiliates, to the extent they hold Allergan ordinary shares) will be asked to approve the scheme for the purposes of satisfying the requirements of the Irish legislation upon which the scheme is based.

At the extraordinary general meeting, Allergan shareholders (including AbbVie and any of its affiliates, to the extent they hold Allergan ordinary shares) will also be asked to approve the scheme, authorize Allergan’s directors to take whatever actions they deem necessary or appropriate for carrying the scheme into effect and approve the cancellation of certain ordinary shares and issuance of new ordinary shares as part of the scheme and other related matters. For more detail on these matters, see “ The Special Meetings of Allergan’s Shareholders ” beginning on page 33.

 

Q:

What constitutes a quorum?

 

A:

Two or more holders of Allergan ordinary shares outstanding, present in person or by proxy, representing a majority of the voting power of Allergan at the Voting Record Time will constitute a quorum for each meeting. Allergan does not currently hold any ordinary shares in treasury (although any such shares would not be included in the calculation of the number of ordinary shares present at the special meetings for the purposes of determining a quorum in any event). Allergan’s inspector of election intends to treat as “present” for these purposes shareholders who have submitted properly executed or transmitted proxies that are marked “abstain.” The inspector will also treat as “present” shares held in “street name” by brokers that are voted on at least one proposal to come before the meeting.

 

Q:

What is the recommendation of the Allergan board of directors regarding the proposals being put to a vote at each special meeting?

 

A:

The board of directors of Allergan (excluding Thomas C. Freyman due to his ownership of AbbVie shares) has unanimously approved the Transaction Agreement and determined that the Transaction Agreement and the transactions contemplated by the Transaction Agreement, including the scheme, are fair to and in the best interests of Allergan and its shareholders and that the terms of the scheme are fair and reasonable. For the purposes of the remainder of this proxy statement, each reference to the Allergan board of directors (or any meeting thereof) is intended to refer to that board or meeting without any participation, recommendation or solicitation, as the case may be, by Mr. Freyman, who has recused himself from such participation, recommendation or solicitation.

The Allergan board of directors unanimously recommends that Allergan shareholders vote:

 

   

“FOR” the scheme of arrangement at the special Court-ordered meeting;

 

   

“FOR” the scheme of arrangement at the extraordinary general meeting;

 

   

“FOR” the cancellation of any Allergan ordinary shares in issue at 11:59 p.m., Irish time, on the day before the Irish High Court hearing to sanction the scheme (excluding, in any case, any Allergan ordinary shares which are held from time to time by AbbVie, Acquirer Sub or any other subsidiary of AbbVie, if any);

 

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“FOR” the authorization of the directors of Allergan to allot and issue new Allergan shares, fully paid up, to Acquirer Sub and/or its nominee(s) in connection with effecting the scheme;

 

   

“FOR” the amendment of the articles of association of Allergan so that any ordinary shares of Allergan that are issued on or after the Voting Record Time (as defined in the scheme of arrangement) to persons other than Acquirer Sub or its nominees will either be subject to the terms of the scheme or will be immediately and automatically acquired by Acquirer Sub and/or its nominee(s) for the scheme consideration;

 

   

“FOR” the approval, on a non-binding, advisory basis, of specified compensatory arrangements between Allergan and its named executive officers; and

 

   

“FOR” the proposal to approve any motion by the Chairman to adjourn the extraordinary general meeting, or any adjournments thereof, to another time and place if necessary or appropriate to solicit additional proxies if there are insufficient votes at the time of the extraordinary general meeting to approve the scheme of arrangement or the other resolutions, other than the advisory vote on specified compensatory arrangements, set out above.

See “ The Transaction—Recommendation of the Allergan Board of Directors and Allergan’s Reasons for the Transaction ” beginning on page 45.

In considering the recommendation of the Allergan board of directors, you should be aware that certain directors and executive officers of Allergan have interests in the proposed transaction that are in addition to, or different from, any interests they might have as shareholders. See “ The Transaction—Interests of Certain Persons in the Transaction ” beginning on page 61.

 

Q:

When is the transaction expected to be completed?

 

A:

As of the date of this proxy statement, the transaction is expected to be completed by early 2020. However, no assurance can be provided as to when or if the transaction will be completed. The required vote of Allergan shareholders to adopt the required shareholder proposals at the special meetings, as well as the necessary regulatory consents and approvals, must first be obtained and other conditions specified in the conditions appendix must be satisfied or, to the extent applicable, waived.

 

Q:

Who is entitled to vote?

 

A:

The board of directors of Allergan has fixed a record date of [    ] as the Voting Record Time. If you were an Allergan shareholder of record at the Voting Record Time, you are entitled to receive notice of and to vote at each special meeting and any adjournments thereof.

 

Q:

What if I sell my Allergan ordinary shares after the Allergan record date?

 

A:

If you transfer your shares after the Allergan record date but before either special meeting, you will retain your right to vote at both special meetings, but will have transferred the right to receive the scheme consideration. In order to receive the scheme consideration, you must hold your shares through the completion of the transaction.

 

Q:

What if I buy Allergan shares after the record date?

 

A:

If you acquire additional Allergan ordinary shares after the Allergan record date, you will not have the right to vote in respect of those additional Allergan ordinary shares at either special meeting. You will have the right to receive the scheme consideration in respect of those additional Allergan ordinary shares if you hold such shares through the completion of the transaction.

 

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Q:

How do I vote?

 

A:

If you are an Allergan shareholder of record, you will receive two proxy cards (one for the special Court-ordered meeting and one for the extraordinary general meeting). You may vote your shares at each Allergan special meeting in one of the following ways:

 

   

by mailing your applicable completed and signed proxy card in the enclosed return envelope;

 

   

by voting by telephone or over the internet as instructed on the applicable enclosed proxy card;

 

   

by handing your applicable completed and signed proxy card to the Chairman of the applicable special meeting before the start of the applicable special meeting; or

 

   

by attending the applicable special meeting and voting in person.

If you are an Allergan shareholder of record, the shares listed on your proxy cards will include, if applicable, shares held in a book-entry account at Computershare Trust Company, N.A., Allergan’s transfer agent.

If you hold your shares through a bank, broker or other nominee, you should follow the instructions provided by your bank, broker or other nominee in order to instruct them how to vote such shares.

In the case of joint holders, the vote of the senior member who tenders a vote, whether in person or by proxy, will be accepted to the exclusion of the votes of the other joint holders of record and, for this purpose, seniority will be determined by the order in which the names appear in the Allergan register of members in respect of the joint holding.

 

Q:

How do I vote shares acquired through an employee program?

 

A:

If you are an Allergan shareholder of record, the shares listed in each of your proxy cards will include, if applicable, shares held in a book-entry account at Computershare Trust Company, N.A., Allergan’s transfer agent.

If you hold your shares through a bank, broker or nominee, you will receive a separate Voter Instruction Form and should follow the instructions provided by your bank, broker or nominee in order to instruct them how to vote such shares.

 

Q:

If my shares are held in “street name” by my bank, broker or other nominee, will my bank, broker or other nominee automatically vote my shares for me?

 

A:

No. Your bank, broker or other nominee will not vote your shares if you do not provide your bank, broker or other nominee with a signed voting instruction form with respect to your shares, such failure to vote being referred to as a “broker non-vote.” Therefore, you should instruct your bank, broker or other nominee to vote your shares by following the directions your bank, broker or other nominee provides.

Brokers do not have discretionary authority to vote on any of the Allergan proposals at either special meeting.

Please see “ The Special Meetings of Allergan’s Shareholders—Voting Ordinary Shares Held in Street Name ” beginning on page 37.

 

Q:

How many votes do I have?

 

A:

At each special meeting, you are entitled to one vote for each Allergan ordinary share that you owned as of [    ] p.m. (Eastern Time in the U.S.) on the Allergan record date, also referred to as the Voting Record Time. As of the Voting Record Time on the Allergan record date, [    ] Allergan ordinary shares were outstanding and entitled to vote at the special Court-ordered meeting and at the extraordinary general meeting.

 

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Q:

Should I send in my stock certificates now?

 

A:

No. Allergan shareholders should keep their existing stock certificates at this time. After the transaction is completed, you will receive written instructions for exchanging your stock certificates for consideration.

 

Q:

What do I need to do now?

 

A:

Shareholders entitled to vote at the special Court-ordered meeting have been sent a form of proxy card for that meeting, and shareholders entitled to vote at the extraordinary general meeting have been sent a form of proxy card for that meeting. Shareholders are strongly urged to complete and return their proxy cards as soon as possible and, in any event, no later than 3:59 p.m. (Eastern Time in the U.S.) on the day immediately preceding the special Court-ordered meeting on [    ] 2019 in the case of the proxy card for the special Court-ordered meeting and 3:59 p.m. (Eastern Time in the U.S.) on the day immediately preceding the extraordinary general meeting on [    ] 2019 in the case of the proxy card for the extraordinary general meeting. Even if you plan to attend either or both special meetings, we encourage you to vote by proxy before the special meeting(s) that you plan to attend. After carefully reading and considering the information contained in this proxy statement, including the annexes and the documents incorporated by reference, please submit your proxy or proxies by telephone or over the internet in accordance with the instructions set forth on the relevant enclosed proxy cards or mark, sign and date the applicable proxy card, and return it in the enclosed prepaid envelope as soon as possible so that your shares may be voted at the applicable special meeting. Your proxy card or your telephone or internet directions will instruct the persons identified as your proxy to vote your shares at the applicable special meeting as directed by you. The proxy card for the special Court-ordered meeting and/or the proxy card for the extraordinary general meeting may also be handed to the Chairman of the special Court-ordered meeting and/or the extraordinary general meeting, as applicable, before the start of the respective special meeting on [    ] 2019 and will still be valid.

If a shareholder signs and returns his, her or its proxy card appointing the Chairman of the applicable special meeting as his, her or its proxy but does not mark the proxy card to tell the proxy how to vote on a voting item, such shares will be voted in respect of such voting item at the discretion of the Chairman of the applicable special meeting.

If you hold your Allergan ordinary shares through a bank, broker or other nominee, you should follow the instructions provided by your bank, broker or other nominee when instructing them how to vote your Allergan ordinary shares.

 

Q:

May I change my vote after I have mailed my signed proxy cards or voted by telephone or over the internet?

 

A:

Yes, you may change your vote at any time before your proxy is voted at the special Court-ordered meeting or at any time before your proxy is voted at the extraordinary general meeting. You can do this in one of four ways:

 

   

deliver a valid later-dated proxy by mail by 3:59 p.m. (Eastern Time in the U.S.) on the day immediately preceding the special Court-ordered meeting on [    ] 2019 in the case of the proxy card for the special Court-ordered meeting and 3:59 p.m. (Eastern Time in the U.S.) on the day immediately preceding the extraordinary general meeting on [    ] 2019 in the case of the proxy card for the extraordinary general meeting;

 

   

before the applicable special meeting, provide written notice that you have revoked your proxy to the Allergan Corporate Secretary, as applicable, so that it is received prior to midnight on the night before the applicable special meeting at the following address:

Allergan plc

Clonshaugh Business and Technology Park,

Coolock, Dublin, D17 E400 Ireland

Attention: Corporate Secretary

 

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submit revised voting instructions by telephone or over the internet by following the instructions set forth on the proxy cards; or

 

   

attend the applicable special meeting and vote in person. Simply attending the applicable meeting, however, will not revoke your proxy or change your voting instructions; you must vote by ballot at the applicable meeting to change your vote.

If you have instructed a bank, broker or other nominee to vote your shares, you must follow directions received from your bank, broker or other nominee to change your vote or revoke your proxy.

 

Q:

Who can help answer my questions?

 

A:

If you have questions about the transaction, or if you need assistance in submitting your proxy or voting your shares or need additional copies of this proxy statement or the enclosed proxy cards, you should contact MacKenzie Partners, the proxy solicitation agent for Allergan, by mail at 1407 Broadway – 27th Floor, New York, New York 10018 by telephone at (800) 322-2885 (toll-free) or (212) 929-5500 (collect), or by email at proxy@mackenziepartners.com.

If your shares are held by a broker, bank or other nominee, you should contact your broker, bank or other nominee for additional information.

 

Q:

Where can I find more information about Allergan?

 

A:

You can find more information about Allergan from various sources described under “ Where You Can Find More Information ” beginning on page 149.

 

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SUMMARY

This summary highlights selected information contained in this proxy statement and may not contain all of the information that may be important to you. Accordingly, you should read carefully this entire proxy statement, including the annexes and the documents referred to or incorporated by reference in this proxy statement. The page references have been included in this summary to direct you to a more complete description of the topics presented below. See also the section entitled “Where You Can Find More Information” beginning on page 149 of this proxy statement.

Information about the Companies (Page 76)

AbbVie

AbbVie is a global, research-driven biopharmaceutical company committed to developing innovative advanced therapies for some of the world’s most complex and critical conditions. AbbVie’s mission is to use its expertise, dedicated people and unique approach to innovation to markedly improve treatments across four primary therapeutic areas: immunology, oncology, virology and neuroscience. In more than 75 countries, AbbVie employees are working every day to advance health solutions for people around the world.

AbbVie was incorporated in Delaware on April 10, 2012. On January 1, 2013, AbbVie became an independent, publicly traded company as a result of the distribution by Abbott Laboratories (“Abbott”) of one hundred percent (100%) of the outstanding common stock of AbbVie to Abbott’s shareholders. AbbVie is listed on the New York Stock Exchange and the Chicago Stock Exchange under the symbol “ABBV.” AbbVie’s principal executive offices are located at 1 North Waukegan Road, North Chicago, Illinois 60064-6400, its telephone number is (847) 932-7900 and its website is www.abbvie.com. Information on AbbVie’s website is not incorporated by reference into or otherwise part of this proxy statement.

Allergan

Allergan is a global pharmaceutical leader. Allergan is focused on developing, manufacturing and commercializing branded pharmaceutical, device, biologic, surgical and regenerative medicine products for patients around the world. Allergan markets a portfolio of leading brands and best-in-class products primarily focused on four key therapeutic areas including medical aesthetics, eye care, central nervous system and gastroenterology. Allergan has operations in more than 100 countries. Allergan’s ordinary shares are currently traded on the New York Stock Exchange under the symbol “AGN.” Allergan’s principal executive offices are located at Clonshaugh Business and Technology Park, Coolock, Dublin, D17 E400, Ireland, and its telephone number is (862) 261-7000 and its website is www.allergan.com. Information on Allergan’s website is not incorporated by reference into or otherwise part of this proxy statement.

Acquirer Sub

Acquirer Sub, a wholly owned subsidiary of AbbVie, is a limited liability company organized in Delaware solely for the purpose of effecting the acquisition. Acquirer Sub was formed on June 20, 2019. To date, Acquirer Sub has not conducted any activities other than those incidental to its formation and the execution of the Transaction Agreement and the other documents relating to the acquisition.

Acquirer Sub’s principal executive offices are located at 1 North Waukegan Road, North Chicago, Illinois 60064-6400, and its telephone number is (847) 932-7900.

The Transaction (Page 39)

On June 25, 2019, Allergan entered into the Transaction Agreement by and among Allergan, AbbVie and Acquirer Sub. Under the terms of the Transaction Agreement, Acquirer Sub will acquire Allergan pursuant to a



 

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scheme of arrangement under Chapter 1 of Part 9 of the Irish Companies Act 2014 (the “Act”) and a capital reduction under Sections 84 to 86 of the Act (collectively referred to as the “scheme” or “scheme of arrangement”). As a result of the scheme, Allergan will become a wholly owned subsidiary of AbbVie.

Structure of the Transaction (Page 77)

Pursuant to the acquisition, Acquirer Sub will acquire the entire issued and to be issued ordinary share capital of Allergan by way of a scheme of arrangement. Upon the completion of the acquisition, Allergan will be a wholly owned subsidiary of AbbVie.

AbbVie reserves the right, subject to the prior written approval of the Irish Takeover Panel (if required), to effect the acquisition by way of a takeover offer, as an alternative to the scheme, in the circumstances described in and subject to the terms of the Transaction Agreement. In such event, such takeover offer will be implemented on terms and conditions that are at least as favorable to Allergan shareholders (except for an acceptance condition set at eighty percent (80%) of the nominal value of the Allergan shares to which such offer relates and which are not already beneficially owned by AbbVie) as those which would apply in relation to the scheme, among other requirements.

Scheme Consideration to Allergan Shareholders (Page 77)

At the effective time, Allergan shareholders will be entitled to receive (i) $120.30 in cash and (ii) 0.8660 of a newly issued share of AbbVie common stock, in exchange for each Allergan ordinary share held by such Allergan shareholders. If the payment of the scheme consideration would result in the issuance of AbbVie common stock in excess of 19.99% of the aggregate shares of AbbVie common stock outstanding immediately prior to the completion (as reasonably determined by AbbVie) (referred to as the “share cap”), the exchange ratio of 0.8660 will be reduced by the smallest number (rounded to the nearest 0.0001) that causes the total number of shares of AbbVie common stock issuable in the acquisition to not exceed the share cap, and the cash consideration described above would then be increased by an amount in cash equal to that number multiplied by the ten (10) day volume-weighted average price of AbbVie common stock starting with the opening of trading on the eleventh trading day prior to the completion date to the closing of trading on the second to last trading day prior to the completion date.

Allergan shareholders will not receive any fractional shares of AbbVie common stock as scheme consideration. Instead, fractional shares will be aggregated and sold in the market by the exchange agent, with the net proceeds of any such sale distributed in cash pro rata to the Allergan shareholders whose fractional entitlements have been sold.

Treatment of Allergan Options and Allergan Share Awards (Page 77)

Allergan equity awards will be treated as set forth in the Transaction Agreement, such that (i) each Allergan option and each Allergan restricted stock unit award that is outstanding immediately prior to the effective time will be substituted by AbbVie with a corresponding award relating to shares of AbbVie common stock, with the number of shares of AbbVie common stock subject to such award and, if applicable, the exercise price applicable to such award, determined in accordance with the formulas set forth in the Transaction Agreement and (ii) each Allergan performance stock unit award that is outstanding as of immediately prior to the effective time will be substituted by AbbVie with an AbbVie restricted stock unit award that vests based on the holder’s continued service following the effective time and relates to a number of shares of AbbVie common stock determined in accordance with the formula set forth in the Transaction Agreement, in each case, as further described below.

At the effective time, each Allergan stock option, whether vested or unvested, that is outstanding and unexercised immediately prior to the effective time, will be substituted by AbbVie with an AbbVie stock option



 

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(a “substituted AbbVie stock option”). The number of shares of AbbVie common stock subject to such substituted AbbVie stock option will equal (i) the number of Allergan ordinary shares (rounded down to the nearest whole share) subject to the Allergan stock option immediately prior to the effective time multiplied by (ii) the “equity award conversion ratio” (as defined below). The exercise price applicable to such substituted AbbVie stock option will equal (i) the exercise price of such Allergan stock option immediately prior to the effective time divided by (ii) the equity award conversion ratio (rounded up to the nearest whole cent).

“Allergan share awards” consist of Allergan restricted stock unit awards and Allergan performance stock unit awards. At the effective time, each Allergan share award that is outstanding immediately prior to the effective time will be substituted by AbbVie with an AbbVie restricted stock unit award (a “substituted AbbVie share award”). The number of shares of AbbVie common stock subject to such substituted AbbVie share award will equal (i) the number of Allergan ordinary shares (rounded up to the nearest whole share) subject to the Allergan share award immediately prior to the effective time multiplied by (ii) the equity award conversion ratio. Each Allergan performance stock unit award will be substituted by AbbVie with an AbbVie restricted stock unit award that vests based on the holder’s continued service (and not subject to satisfaction of any performance-based vesting conditions), and for any performance stock unit awards that were subject to performance-based vesting conditions on June 25, 2019, any applicable performance metrics will be deemed satisfied at one hundred and thirty percent (130%) of target as of the effective time.

Following the effective time, the substituted AbbVie stock options and substituted AbbVie share awards will have the same terms and conditions (including, for any performance stock unit awards, the same time-based vesting conditions, but excluding any performance-based vesting conditions, as described above) as applied to the corresponding Allergan stock option or Allergan share award immediately prior to the effective time, except for immaterial administrative or ministerial changes that are not adverse to any holder other than in any de minimis respect.

The “equity award conversion ratio” is equal to the sum (rounded to the nearest one thousandth) of (i) the exchange ratio specified in the Transaction Agreement (currently 0.8660) and (ii) the quotient obtained by dividing (A) the per share cash consideration payable under the Transaction Agreement ($120.30) by (B) the volume-weighted average price of a share of AbbVie common stock for the ten (10) trading day period starting with the opening of trading on the eleventh (11th) trading day prior to the completion date to the closing of trading on the second to last trading day prior to the completion date.

Recommendation of the Allergan Board of Directors and Allergan’s Reasons for the Transaction (Page 45)

The Allergan board of directors has approved the Transaction Agreement and determined that the Transaction Agreement and the transactions contemplated by the Transaction Agreement, including the scheme, are advisable for, fair to and in the best interests of Allergan and the Allergan shareholders, and that the terms of the scheme are fair and reasonable.

The Allergan board of directors recommends that Allergan shareholders vote:

 

   

“FOR” the scheme of arrangement at the special Court-ordered meeting;

 

   

“FOR” the scheme of arrangement at the extraordinary general meeting;

 

   

“FOR” the cancellation of any Allergan ordinary shares in issue at 11:59 p.m., Irish time, on the day before the Irish High Court hearing to sanction the scheme (excluding, in any case, any Allergan ordinary shares which are held from time to time by AbbVie, Acquirer Sub or any other subsidiary of AbbVie, if any);

 

   

“FOR” the authorization of the directors of Allergan to allot and issue new Allergan shares, fully paid up, to Acquirer Sub and/or its nominee(s) in connection with effecting the scheme;



 

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“FOR” the amendment of the articles of association of Allergan so that any ordinary shares of Allergan that are issued on or after the Voting Record Time (as defined in the scheme of arrangement) to persons other than Acquirer Sub or its nominees will either be subject to the terms of the scheme or will be immediately and automatically acquired by Acquirer Sub and/or its nominee(s) for the scheme consideration;

 

   

“FOR” the approval, on a non-binding, advisory basis, of specified compensatory arrangements between Allergan and its named executive officers; and

 

   

“FOR” the proposal to approve any motion by the Chairman to adjourn the extraordinary general meeting, or any adjournments thereof, to another time and place if necessary or appropriate to solicit additional proxies if there are insufficient votes at the time of the extraordinary general meeting to approve the Scheme of Arrangement or the other resolutions set out above, other than the advisory vote on specified compensatory arrangements.

The Allergan board of directors considered many factors in making their determination that the Transaction Agreement and the transactions contemplated thereby, including the scheme, are advisable for, fair to and in the best interests of Allergan and Allergan’s shareholders, and that the terms of the scheme are fair and reasonable. For a more complete discussion of these factors, see “ The Transaction—Recommendation of the Allergan Board of Directors and Allergan’s Reasons for the Transaction ” beginning on page 45.

In considering the recommendation of the Allergan board of directors, you should be aware that certain directors and executive officers of Allergan have interests in the proposed transaction that are in addition to, or different from, any interests they might have as shareholders. See “ The Transaction—Interests of Certain Persons in the Transaction ” beginning on page 61.

Opinion of J.P. Morgan Securities LLC (Page 49)

J.P. Morgan Securities LLC, which we refer to in this proxy statement as “J.P. Morgan,” delivered its opinion for the benefit of Allergan’s board of directors that, as of June 24, 2019 and based upon and subject to the factors and assumptions set forth therein, the scheme consideration was fair, from a financial point of view, to the holders of Allergan ordinary shares.

The full text of the written opinion of J.P. Morgan, dated June 24, 2019, which sets forth assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with the opinion, is attached as Annex D. J.P. Morgan provided its opinion for the information and assistance of the Allergan board of directors in connection with its consideration of the transaction. The J.P. Morgan opinion is not a recommendation as to how any holder of Allergan ordinary shares should vote with respect to the transaction or any other matter.

Pursuant to an engagement letter between Allergan and J.P. Morgan, Allergan has agreed to pay J.P. Morgan a transaction fee of $123.0 million, of which $12.5 million became payable upon delivery of J.P. Morgan’s opinion (regardless of the conclusion reached therein), and the balance of which is payable at the effective time of the transaction contemplated by the Transaction Agreement. See “ The Transaction—Opinion of J.P. Morgan Securities LLC ” beginning on page 49 of this proxy statement.

Interests of Certain Persons in the Transaction (Page 61)

In considering the recommendation of the Allergan board of directors with respect to the Transaction Agreement, you should be aware that some of Allergan’s directors and executive officers have interests in the proposed transaction that are in addition to, or different from, any interests of Allergan’s shareholders generally.



 

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Interests of Allergan’s directors and executive officers that may be in addition to, or different from, any interests of Allergan’s shareholders include the vesting of equity awards and payment of severance benefits upon certain qualifying terminations of employment during a specified period following a change in control of Allergan, eligibility to receive transaction-related retention awards, the extension of the Chief Executive Officer’s employment agreement on the same terms under his current employment agreement, dated as of August 3, 2015, and rights to ongoing indemnification and insurance coverage. In addition, Thomas C. Freyman is not participating in the recommendation of the Allergan board of directors as Mr. Freyman is regarded under Rule 3 of the Irish Takeover Rules as having a conflict of interest due to Mr. Freyman’s shareholding in AbbVie.

These interests are discussed in more detail in the section entitled “ The Transaction—Interests of Certain Persons in the Transaction ” beginning on page 61. The Allergan board of directors was aware of the additional or different interests set forth herein and considered such interests along with other matters in approving the Transaction Agreement and the proposed transaction.

Material Tax Consequences of the Proposed Transaction (Page 71)

For Irish tax purposes, the receipt of cash and AbbVie common stock for Allergan ordinary shares pursuant to the scheme of arrangement should not be within the charge to Irish capital gains tax in the case of Allergan shareholders who are neither resident nor ordinarily resident in Ireland for Irish tax purposes and who do not hold their shares in connection with a trade carried on by such shareholders through an Irish branch or agency. See “ Material Tax Consequences of the Proposed Transaction—Irish Tax Considerations—Taxation of Chargeable Gains ” and “ Part 2—Explanatory Statement ” beginning on pages 71 and 152 respectively.

For U.S. federal income tax purposes, the receipt of cash and AbbVie common stock for Allergan ordinary shares pursuant to the scheme will be a taxable transaction, and a U.S. holder (as defined below under “ Material Tax Consequences of the Proposed Transaction Material U.S. Federal Income Tax Considerations ”) will generally recognize gain or loss equal to the difference, if any, between (i) the sum of the cash and the fair market value of the AbbVie common stock received in the scheme and (ii) the U.S. holder’s adjusted tax basis in the Allergan ordinary shares surrendered in exchange therefor.

Holders of Allergan ordinary shares should read the section entitled “ Material Tax Consequences of the Proposed Transaction ” beginning on page 71 for a more complete discussion of certain Irish and U.S. federal income tax consequences of the scheme. Tax matters can be complicated, and the tax consequences to a particular holder will depend on such holder’s particular facts and circumstances. Holders of Allergan ordinary shares should consult their own tax advisors to determine the specific consequences to them of receiving AbbVie common stock and cash pursuant to the scheme.

No Dissenters’ Rights (Page 70)

Under Irish law, holders of Allergan ordinary shares do not have appraisal or dissenters’ rights with respect to the acquisition or any of the other transactions described in this proxy statement.

Regulatory Approvals Required (Page 68)

United States Antitrust

Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder (referred to as the “HSR Act”), the acquisition cannot be consummated until, among other things, notifications have been submitted to the U.S. Federal Trade Commission (referred to as the “FTC”) and the Antitrust Division of the U.S. Department of Justice (referred to as the “Antitrust Division”), and



 

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specified waiting period requirements have been observed. On July 25, 2019, each of AbbVie and Allergan filed a Notification and Report Form (referred to as “HSR Notification Form”) pursuant to the HSR Act with the FTC and the Antitrust Division, initiating a 30-day waiting period. The 30-day waiting period under the HSR Act is scheduled to expire at 11:59 p.m. (Eastern Time in the U.S.) on August 26, 2019; however, if AbbVie withdraws and refiles its HSR Notification Form prior to the expiration of the initial 30-day waiting period, a new 30-day waiting period is initiated. During the 30-day waiting period, the FTC or the Antitrust Division can choose to shorten the waiting period by granting early termination or may extend the waiting period by issuing a Request for Additional Information and Documentary Materials (referred to as “Second Request”) to each party. If Second Requests are issued, the waiting period would be extended until 11:59 p.m. (Eastern Time in the U.S.) on the 30th day after certification of substantial compliance with such Second Request by both parties (however, the parties could agree with the FTC or DOJ not to consummate the acquisition for some period of time after the waiting period expires). As a practical matter, if such Second Requests were issued, it could take a significant period of time to achieve substantial compliance with such Second Requests.

Other Regulatory Clearances

AbbVie and Allergan derive revenues in other jurisdictions where merger control filings or clearances are required, including clearance by the European Commission and in Brazil, Canada, China, Israel, Mexico, Japan, South Africa, South Korea, Turkey and the United Kingdom (only in the event of any exit by the United Kingdom from, or suspension or termination of its membership in, the European Union such that a United Kingdom governmental entity has jurisdiction under any antitrust law to review the transaction contemplated by the Transaction Agreement). The transaction cannot be consummated until after the applicable waiting periods have expired or the relevant approvals have been obtained under the antitrust and competition laws of the countries listed above where merger control filings or approvals are required.

Irish Court Approvals

The scheme of arrangement requires the approval of the Irish High Court, which involves an application by Allergan to the Irish High Court to sanction the scheme. The Irish High Court must also confirm the reduction of capital of Allergan that would be effected by extraordinary general meeting resolution #2.

Conditions to the Completion of the Acquisition (Page 92)

The scheme and the completion of the acquisition is subject to the satisfaction (or waiver, to the extent permitted) of all of the following conditions:

 

   

the approval of the scheme at the special Court-ordered meeting (or at any adjournment of such meeting);

 

   

the extraordinary general meeting resolutions other than the specified compensatory arrangement resolution and the adjournment resolution being duly passed by the Allergan shareholders at the extraordinary general meeting (or at any adjournment of such meeting);

 

   

the Irish High Court’s sanction of the scheme of arrangement (without material modification) and related reduction of capital and registration of the Court Order and minute with the Registrar of Companies;

 

   

the approval for listing on the New York Stock Exchange (subject only to official notice of issuance) of all of the shares of AbbVie common stock to be issued in the acquisition;

 

   

all applicable waiting periods under the HSR Act in connection with the acquisition having expired or having been terminated, and, to the extent applicable, any agreement between Allergan and AbbVie, on the one hand, and the FTC or the Antitrust Division, on the other hand, not to consummate the scheme or the acquisition having expired or been earlier terminated;



 

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to the extent (i) the Acquisition constitutes a concentration within the scope of the EC Merger Regulation or otherwise is a concentration that is subject to the EC Merger Regulation, the European Commission having decided to allow the closing of the Acquisition, or (ii) that all or part of the Acquisition is referred by the European Commission to the relevant authority of one or more member countries of the European Economic Area, such relevant authority(ies) (in the case of a partial referral in conjunction with a final decision of the European Commission) having issued a final decision or decisions which satisfies (or together satisfy) the prior clause (i);

 

   

all required clearances of any governmental entity having been obtained and remaining in full force and effect and all applicable waiting periods having expired, lapsed or been terminated (as appropriate), in each case in connection with the acquisition, under the antitrust laws of the U.S., European Union, China, Brazil, Canada, Israel, Mexico, Japan, South Africa, South Korea, Turkey and the United Kingdom (only in the event of any exit by the United Kingdom from, or suspension or termination of its membership in, the European Union such that a United Kingdom governmental entity has jurisdiction to review the acquisition under antitrust laws) (each a “required antitrust jurisdiction”);

 

   

(a) no order, writ, decree, judgment or injunction (whether temporary or permanent) has been issued, promulgated, made, rendered or entered into by any court or other tribunal of competent jurisdiction, and (b) no law (excluding any antitrust law other than those of a required antitrust jurisdiction) has been enacted, issued, promulgated, enforced or entered and continues in effect and, in each case of clauses (a) and (b), restrains, enjoins, makes illegal or otherwise prohibits the consummation of the acquisition;

 

   

the Transaction Agreement not having been terminated in accordance with its terms;

 

   

the absence of a material adverse effect with respect to each party since June 25, 2019;

 

   

the accuracy of each of the parties’ representations and warranties, subject to specified materiality standards; and

 

   

the performance and compliance by each party, in all material respects, with all of its covenants and agreements under the Transaction Agreement.

AbbVie reserves the right, subject to the prior written approval of the Irish Takeover Panel (if required), to effect the acquisition by way of a takeover offer, as an alternative to the scheme, in the circumstances described in and subject to the terms of the Transaction Agreement. In such event, such takeover offer will be implemented on terms and conditions that are at least as favorable to Allergan shareholders and equity award holders (except for an acceptance condition set at eighty percent (80%) of the nominal value of the Allergan shares to which such offer relates and which are not already beneficially owned by AbbVie) as those which would apply in relation to the scheme, among other requirements. If AbbVie is required to make a mandatory offer for Allergan shares under the provisions of Rule 9 of the Irish Takeover Rules (by virtue of having, at that time, accumulated a thirty percent (30%) stake in Allergan between itself and certain of its affiliates), AbbVie may make such alterations to the conditions set forth above as are necessary to comply with the provisions of that rule.

The acquisition is also conditioned on the scheme becoming effective and unconditional by not later than June 25, 2020 (or September 25, 2020, if extended under the terms of the Transaction Agreement) (or such earlier date as may be specified by the Irish Takeover Panel, or such later date as AbbVie and Allergan may agree, subject to receiving the consent of the Irish Takeover Panel and the Irish High Court, in each case if required). In addition, the scheme will lapse unless it is effective on or prior to June 25, 2020 (unless extended under the terms of the Transaction Agreement to September 25, 2020) (or such later date as AbbVie and Allergan may agree, subject to receiving the consent of the Irish Takeover Panel and the Irish High Court, in each case if required). See “ The Transaction Agreement—Conditions to the Completion of the Acquisition ” beginning on page 92 of this proxy statement. The complete text of the conditions appendix is attached as Annex B to this proxy statement.



 

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Termination of the Transaction Agreement (Page 93)

The Transaction Agreement may be terminated at any time prior to the effective time in any of the following ways:

 

   

by mutual written consent of Allergan and AbbVie;

 

   

by either Allergan or AbbVie:

 

   

if after completion of the special Court-ordered meeting or the extraordinary general meeting, the necessary resolutions have not been approved by the requisite votes;

 

   

subject to certain exceptions, if the acquisition has not been consummated by 5:00 p.m., New York City time, on June 25, 2020 (or September 25, 2020, if extended under the terms of the Transaction Agreement);

 

   

if the Irish High Court declines or refuses to sanction the scheme, unless both parties agree in writing that the decision of the Irish High Court will be appealed (it is agreed that Allergan will make such an appeal if requested by AbbVie and the counsel appointed by AbbVie and by Allergan agree that doing so is a reasonable course of action);

 

   

subject to certain exceptions, if there is in effect any (x) law other than an order, writ, decree, judgment or injunction described in clause (y) (excluding any antitrust law of any jurisdiction that is not a required antitrust jurisdiction) in any jurisdiction of competent authority or (y) final and non-appealable order, writ, decree, judgment, or injunction issued, promulgated, made, rendered or entered into by any court or other tribunal of competent jurisdiction, that, in the case of each of clauses (x) and (y), permanently restrains, enjoins, makes illegal or otherwise prohibits the consummation of the acquisition; or

 

   

by Allergan:

 

   

if AbbVie or Acquirer Sub breaches or fails to perform in any material respect any of its covenants or other agreements contained in the Transaction Agreement or if any of its representations or warranties set forth in the Transaction Agreement are inaccurate such that the breach, failure to perform or inaccuracy (1) would result in the failure of certain closing conditions and (2) the breach, failure to perform or inaccuracy is not reasonably capable of being cured by June 25, 2020 (or September 25, 2020, if extended under the terms of the Transaction Agreement) or, if curable, is not cured by the earlier of June 25, 2020 (or September 25, 2020, if extended under the terms of the Transaction Agreement) and 30 days following written notice by Allergan;

 

   

prior to obtaining Allergan shareholder approval at both special meetings, in order to enter into an agreement providing for an Allergan Superior Proposal as defined below; or

 

   

by AbbVie:

 

   

if Allergan breaches or fails to perform in any material respect any of its covenants or other agreements contained in the Transaction Agreement or if any of its representations or warranties set forth in the Transaction Agreement are inaccurate such that the breach, failure to perform or inaccuracy (1) would result in the failure of certain closing conditions and (2) the breach, failure to perform or inaccuracy is not reasonably capable of being cured by the earlier of June 25, 2020 (or September 25, 2020, if extended under the terms of the Transaction Agreement) or, if curable, is not cured by the earlier of June 25, 2020 (or September 25, 2020, if extended under the terms of the Transaction Agreement) and 30 days following written notice by Allergan thereof; or

 

   

prior to obtaining Allergan shareholder approval, Allergan, its subsidiaries or its or their respective directors, officers or employees (A) withdraw or qualify, amend or modify in any



 

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manner adverse to AbbVie, the recommendation of the Allergan board of directors in favor of the scheme (referred to as the “scheme recommendation”) or the comparable recommendation if AbbVie should elect to implement the acquisition by way of a takeover offer, (B) fail to include the scheme recommendation in the document distributed to Allergan shareholders and, for information only, holders of Allergan equity awards that contains, among other things, the scheme, notice or notices of the special meetings and an explanatory statement subject to the Act or this proxy statement, (C) recommend, adopt or approve or publicly propose to recommend, adopt or approve any Allergan Alternative Proposal or (D) fail to reaffirm the scheme recommendation in a statement complying with Rule 14e-2(a) under the United States Securities Exchange Act of 1934 with regard to an Allergan Alternative Proposal or in connection with such action by the close of business on the tenth (10th) business day after the commencement of such Allergan Alternative Proposal, defined elsewhere in this proxy statement, under Rule 14e-2(a).

Reverse Termination Payment

The Transaction Agreement also provides that, upon termination of the Transaction Agreement due to the failure of specified conditions related to obtaining antitrust clearance for the acquisition or related to antitrust laws, AbbVie will pay Allergan a reverse termination fee of approximately two percent (2%) of the implied transaction equity value of approximately $63 billion as of June 24, 2019, upon termination of the Transaction Agreement under specified circumstances.

Upon Allergan becoming entitled to the foregoing reverse termination payment, neither AbbVie nor Acquirer Sub will have further liability in connection with the termination of the Transaction Agreement, except for liability for willful breach, fraud or as provided in the confidentiality agreement between Allergan and AbbVie dated as of May 30, 2019.

Expenses Reimbursement Agreement (Page 97)

In connection with the execution of the Transaction Agreement, Allergan and AbbVie entered into an expenses reimbursement agreement, the terms of which have been consented to by the Irish Takeover Panel for the purposes of Irish Takeover Rule 21.2 only. Under the expenses reimbursement agreement, Allergan has agreed to pay to AbbVie the documented, specific, quantifiable third-party costs and expenses incurred by AbbVie in connection with the acquisition upon the termination of the Transaction Agreement in certain specified circumstances. The maximum amount payable by Allergan to AbbVie pursuant to the expenses reimbursement agreement is an amount equal to one percent (1%) of the aggregate value of the total scheme consideration (other than scheme consideration payable on Allergan ordinary shares held by AbbVie or by persons deemed to be acting in concert with AbbVie under the Irish Takeover Rules and the cash resulting from the aggregation and sale of fractional shares).

See “ Expenses Reimbursement Agreement ” beginning on page 97 of this proxy statement. The complete text of the expenses reimbursement agreement is attached as Annex C to this proxy statement.

Financing Relating to the Transaction (Page 99)

AbbVie estimates that it will need approximately $41 billion in order to pay Allergan shareholders the cash consideration due to them under the Transaction Agreement and to pay related fees, expenses and other transaction costs in connection with the acquisition. AbbVie anticipates that the funds needed to pay the foregoing amount will be derived from (i) cash on hand, (ii) borrowings under its existing and new credit facilities, including as described below, (iii) the proceeds from the sale of debt securities or (iv) any combination of the foregoing. In addition, either prior to or after the closing of the acquisition, AbbVie may conduct one or



 

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more exchange offers, offers to purchase and/or consent solicitations with respect to Allergan’s outstanding debt securities. The terms and timing of any such debt offerings, exchange offers, offers to purchase and/or consent solicitations has not been determined as of the date of this proxy statement. This proxy statement is not intended to and does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy or an invitation to purchase or subscribe for any debt securities of AbbVie or Allergan. No offer of debt securities will be made in the United States absent registration under the U.S. Securities Act of 1933, referred to as the Securities Act, or pursuant to an exemption from, or in a transaction not subject to, such registration requirements.



 

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RISK FACTORS

In addition to the other information contained in or incorporated by reference into this proxy statement, you should consider carefully the following risk factors, including the matters addressed under the caption “Cautionary Statement Regarding Forward-Looking Statements” beginning on page 30. You should also read and consider the risks associated with the business of AbbVie and the risks associated with the business of Allergan because these risks will also affect the combined company. The risks associated with the business of AbbVie can be found in the AbbVie Annual Report on Form 10-K for the fiscal year ended December 31, 2018, which is incorporated by reference into this proxy statement. The risks associated with the business of Allergan can be found in the Allergan Annual Report on Form 10-K for the fiscal year ended December 31, 2018, which is incorporated by reference into this proxy statement. See “Where You Can Find More Information” beginning on page 149.

Risks Relating to the Transaction

The number of AbbVie shares that Allergan shareholders will be entitled to receive as a result of the transaction will be based on a fixed exchange ratio (except for adjustments in limited circumstances pursuant to the Transaction Agreement). The value of the AbbVie shares that Allergan shareholders receive could be different than at either time Allergan shareholders vote to approve the scheme.

At completion, Allergan shareholders will be entitled to receive (i) $120.30 in cash and (ii) 0.8660 of a newly issued share of AbbVie common stock, in exchange for each Allergan ordinary share held by such Allergan shareholders. The number of AbbVie shares that Allergan shareholders will be entitled to receive will not be adjusted in the event of any increase or decrease in the share price of either AbbVie common stock or Allergan ordinary shares between the time the Allergan shareholders vote to approve the scheme and the completion time.

The market value of the shares of AbbVie common stock that Allergan shareholders will be entitled to receive when the transaction is completed could vary significantly from the market value of AbbVie common stock on the date of this proxy statement or the date of either Allergan special meeting. Because the exchange ratio will not be adjusted to reflect any changes in the market value of AbbVie common stock or Allergan ordinary shares, such market price fluctuations may affect the value that Allergan shareholders will be entitled to receive upon completion of the transaction. Share price changes may result from a variety of factors, including changes in the business, operations or prospects of AbbVie or Allergan, market assessments of the likelihood that the transaction will be completed, the timing of the transaction, regulatory considerations, general market and economic conditions and other factors. Shareholders are urged to obtain current market quotations for AbbVie common stock and Allergan ordinary shares.

The transaction is subject to customary closing conditions, including conditions related to required shareholder approvals and required regulatory approvals, and may not be completed on a timely basis, or at all.

The completion of the transaction is subject to a number of customary conditions and there can be no assurance that the conditions to the closing of the transaction will be satisfied or waived (to the extent permitted by law). The failure to satisfy the required conditions could delay the completion of the transaction for a significant period of time or prevent the completion from occurring at all. These closing conditions include the approval of the scheme by a majority in number of the Allergan shareholders of record, such shareholders representing seventy-five percent (75%) or more in value of the Allergan ordinary shares held by such holders, present and voting either in person or by proxy, at the special Court-ordered meeting, and the approval by Allergan shareholders of certain other transaction-related resolutions at the extraordinary general meeting.

These closing conditions also include certain antitrust related approvals, including (i) that all applicable waiting periods under the HSR Act in connection with the acquisition having expired or having been terminated,

 

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and termination or expiration of any agreement between Allergan and AbbVie, on the one hand, and the FTC or the Antitrust Division, on the other hand, not to consummate the acquisition, (ii) all required clearances of any governmental entity having been obtained and remaining in full force and effect and all applicable waiting periods having expired, lapsed or been terminated (as appropriate), in each case in connection with the transaction, under the antitrust laws of the required antitrust jurisdictions, (iii) to the extent (a) the Acquisition constitutes a concentration within the scope of the EC Merger Regulation or otherwise is a concentration that is subject to the EC Merger Regulation, the European Commission having decided to allow the closing of the Acquisition, or (b) that all or part of the Acquisition is referred by the European Commission to the relevant authority of one or more member countries of the European Economic Area, such relevant authority(ies) (in the case of a partial referral in conjunction with a final decision of the European Commission) having issued a final decision or decisions which satisfies (or together satisfy) the prior clause (a). The governmental agencies from which the parties will seek certain approvals related to these conditions have broad discretion in administering the governing regulations. As a condition to their approval of the transaction, agencies may impose requirements, limitations or costs or require divestitures or place restrictions on the conduct of the combined company’s business after the closing. Such requirements, limitations, costs or restrictions could delay or prevent the consummation of the transaction or have a material adverse effect on the combined company’s business and results of operations.

In addition, the closing conditions include other legal and regulatory conditions, such as (i) the sanction by the Irish High Court of the scheme and registration of the court order with the Irish Registrar of Companies, (ii) the approval by the New York Stock Exchange of the listing of all of the shares of AbbVie common stock to be issued in connection with the scheme, and (iii) (a) no order, writ, decree, judgment or injunction (whether temporary or permanent) having been issued, promulgated, made, rendered or entered into by any court or other tribunal of competent jurisdiction, and (b) no law (excluding any antitrust law other than those of a required antitrust jurisdiction) having been enacted, issued, promulgated, enforced or entered and continuing in effect and, in each case of clauses (a) and (b), that restrains, enjoins, makes illegal or otherwise prohibits the consummation of the transaction.

The transaction is also subject to other customary closing conditions, including: (i) the Transaction Agreement not having been terminated in accordance with its terms, (ii) the accuracy of each party’s representations and warranties made in the Transaction Agreement, subject to specified materiality standards, (iii) the absence of a material adverse effect with respect to each party since June 25, 2019 and (iv) the performance and compliance by each party of all of its obligations and compliance with all of its covenants under the Transaction Agreement in all material respects. For a more complete summary of the conditions that must be satisfied or waived prior to the completion of the transaction, see “ The Transaction Agreement—Conditions to the Completion of the Acquisition ” beginning on page 92. There can be no assurance that the conditions to completion of the transaction will be satisfied or waived or that the transaction will be completed within the expected time frame, or at all.

The Transaction Agreement contains provisions that limit Allergan’s ability to pursue alternatives to the transaction and, in specified circumstances, could require Allergan to reimburse certain of AbbVie’s expenses.

Under the Transaction Agreement, Allergan is subject to certain restrictions on its ability to solicit alternative acquisition proposals from third parties, engage in discussion or negotiations with respect to such proposals or provide information in connection with such proposals, subject to customary exceptions. Allergan may terminate the Transaction Agreement and enter into an agreement providing for a superior proposal only if specified conditions have been satisfied, including a determination by the Allergan board of directors (after consultation with a financial advisor of nationally recognized reputation and outside legal counsel) that such proposal is more favorable to the Allergan shareholders from a financial point of view than the transaction, and such a termination would result in Allergan being required to reimburse certain of AbbVie’s expenses under the expenses reimbursement agreement. These provisions could discourage a third party that may have an interest in

 

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acquiring all or a significant part of Allergan from considering or proposing that acquisition, even if such third party were prepared to pay consideration with a higher value than the value of the scheme consideration.

Failure to consummate the transaction could negatively impact the share price and the future business and financial results of Allergan.

If the transaction is not consummated, the ongoing business of Allergan may be adversely affected and, without realizing any of the potential benefits of having consummated the transaction, Allergan will be subject to a number of risks, including the following:

 

   

Allergan will be required to pay certain costs and expenses relating to the proposed transaction;

 

   

if the Transaction Agreement is terminated under specified circumstances, Allergan may be obligated to reimburse certain expenses of AbbVie;

 

   

matters relating to the transaction (including integration planning) may require substantial commitments of time and resources by Allergan management, which could otherwise have been devoted to other opportunities that may have been beneficial to Allergan;

 

   

the Transaction Agreement restricts Allergan, without AbbVie’s consent and subject to certain exceptions, from making certain acquisitions and taking other specified actions until the transaction occurs or the Transaction Agreement terminates. These restrictions may prevent Allergan from pursuing otherwise attractive business opportunities and making other changes to its business that may arise prior to completion of the transaction or termination of the Transaction Agreement; and

 

   

Allergan could be subject to litigation related to any failure to consummate the transaction or related to any enforcement proceeding commenced against Allergan to perform its obligations under the Transaction Agreement.

If the transaction is not consummated, these risks may materialize and may adversely affect Allergan’s business, financial results and share price.

Allergan’s directors and executive officers have interests in the transaction that are in addition to, or different from, any interests they might have as shareholders.

In considering the recommendation of the Allergan board of directors with respect to the Transaction Agreement, you should be aware that some of Allergan’s directors and executive officers have interests in the proposed transaction that are in addition to, or different from, any interests they might have as shareholders. These interests include the vesting of equity awards and payment of severance benefits upon certain qualifying terminations of employment during a specified period following a change in control of Allergan, eligibility to receive transaction-related retention awards, the extension of the Chief Executive Officer’s employment agreement on the same terms as in effect under his current employment agreement, dated as of August 3, 2015, and rights to ongoing indemnification and insurance coverage. These interests, among others, may have an influence on the decision of the directors and executive officers of Allergan with respect to the scheme and any additional proposals being presented at the extraordinary general meeting. For more information, including the assumptions used to estimate the value of such interests, please see “ The Transaction—Interests of Certain Persons in the Transaction ” beginning on page 61. You should consider these interests in connection with your vote on the related proposals.

The opinion of Allergan’s financial advisor was based on the financial advisor’s financial analysis and considered factors such as market and other conditions then in effect, and financial forecasts and other information made available to the financial advisor, as of the date of the opinion.

The opinion rendered for the benefit of the Allergan board of directors by J.P. Morgan was provided in connection with, and at the time of, the evaluation of the transaction and the Transaction Agreement by the

 

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Allergan board of directors. The opinion was based on the financial, economic, market and other conditions as in effect on, and the information made available to J.P. Morgan, as of the date of the opinion. Events occurring after the date of the opinion may affect the opinion and the assumptions used in preparing it. The Allergan board of directors has not obtained an updated opinion as of the date of this proxy statement from J.P. Morgan, and the Allergan board of directors does not expect to obtain an updated opinion prior to completion of the transaction. J.P. Morgan does not assume any obligation to update, revise or reaffirm its opinion. Changes in the operations and prospects of AbbVie or Allergan, general market and economic conditions and other factors that may be beyond the control of Allergan, and on which the opinion was based, may have altered the value of AbbVie or Allergan or the prices of Allergan ordinary shares or AbbVie common stock since the date of the opinion, or may alter such values and prices by the time the transaction is completed and, therefore, the opinion does not address the fairness of the scheme consideration from a financial point of view at the effective time. The opinion does not speak as of any date other than the date of the opinion. For a description of the opinion that J.P. Morgan rendered to the Allergan board of directors, please refer to “ The Transaction—Opinion of J.P. Morgan Securities LLC ” beginning on page 49.

The financial forecasts are based on various assumptions that may not be realized.

The financial estimates set forth in the forecasts included under the section “ The Transaction—Allergan Unaudited Prospective Financial Information ” were based on assumptions of, and information available to, Allergan’s management when prepared and these estimates and assumptions are subject to uncertainties, many of which are beyond Allergan’s control and may not be realized. Many factors mentioned in this proxy statement, including the risks outlined in this “ Risk Factors ” section and the events or circumstances described under “ Cautionary Statement Regarding Forward-Looking Statements ,” will be important in determining the combined company’s future results. As a result of these contingencies, actual future results may vary materially from the estimates. In view of these uncertainties, the inclusion of financial estimates in this proxy statement is not and should not be viewed as a representation that the forecasted results will necessarily reflect actual future results.

Allergan’s financial estimates set forth in the forecasts included under the sections “ The Transaction—Allergan Unaudited Prospective Financial Information ” were not prepared with a view toward public disclosure, and such financial estimates were not prepared with a view toward compliance with published guidelines of any regulatory or professional body. Further, any forward-looking statement speaks only as of the date on which it is made, and Allergan does not undertake any obligation, other than as required by applicable law, to update the financial estimates herein to reflect events or circumstances after the date those financial estimates were prepared or to reflect the occurrence of anticipated or unanticipated events or circumstances. Neither Allergan’s independent accountants, nor any other independent accountants, have compiled, examined or performed any procedures with respect to Allergan’s prospective financial information included under the section “ The Transaction—Allergan Unaudited Prospective Financial Information ,” nor have they expressed any opinion or any other form of assurance on such information or achievability thereof, and, accordingly, such independent accountants assume no responsibility for, and disclaim any association with, such prospective financial information. The audit reports of such independent accountants included or incorporated by reference herein, as applicable, relate exclusively to the historical financial information of the entities named in those reports and do not cover any other information in this proxy statement and should not be read to do so. See “ The Transaction—Allergan Unaudited Prospective Financial Information ” beginning on page 57 for more information.

Allergan shareholders will have a reduced ownership and voting interest after the transaction and will exercise less influence over management.

AbbVie will issue new shares of AbbVie common stock to Allergan shareholders in the transaction. Immediately following the completion of the transaction, current Allergan shareholders are expected to hold approximately seventeen percent (17%) of the outstanding shares of AbbVie common stock on a fully diluted basis. Allergan shareholders currently have the right to vote for their directors and on other matters affecting

 

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Allergan. Following completion of the transaction, the AbbVie common stock that each holder of Allergan ordinary shares receives in exchange for its Allergan ordinary shares will represent a percentage ownership of AbbVie that is smaller than the Allergan shareholders’ percentage ownership of Allergan before the effective time. As a result of this reduced ownership percentage, Allergan shareholders will have less influence on the management and policies of the combined company than they have as to Allergan prior to the transaction.

The shares of AbbVie common stock to be received by Allergan shareholders upon completion of the acquisition carry different rights than Allergan ordinary shares.

Upon completion of the acquisition, Allergan shareholders will no longer be shareholders of Allergan, but will instead become stockholders of AbbVie, and their rights as AbbVie stockholders will be governed by the terms of AbbVie’s amended and restated certificate of incorporation, as it may be amended from time to time, and AbbVie’s amended and restated by-laws, as they may be amended from time to time. The terms of AbbVie’s amended and restated certificate of incorporation and AbbVie’s amended and restated by-laws are in some respects materially different than the terms of Allergan’s amended and restated memorandum and articles of association, which currently govern the rights of Allergan shareholders. See “ Description of AbbVie Capital Stock ” and “ Comparison of the Rights of AbbVie Stockholders and Allergan Shareholders ” beginning on pages 116 and 120 respectively of this proxy statement for a discussion of the different rights associated with Allergan ordinary shares and shares of AbbVie common stock.

While the transaction is pending, Allergan will be subject to business uncertainties related to its relationships with employees, customers and suppliers, which could adversely affect Allergan’s business and operations.

Uncertainty about the effect of the transaction on employees, customers and suppliers may have an adverse effect on Allergan. These uncertainties may impair Allergan’s ability to attract, retain and motivate key personnel until the transaction is consummated and for a period of time thereafter, and could cause customers, suppliers and others who deal with Allergan to seek to change or terminate existing business relationships with Allergan. Employee retention may be particularly challenging during the pendency of the transaction because employees may experience uncertainty about their future roles with the combined company. If, despite Allergan’s retention efforts, key employees depart because of issues relating to the uncertainty and difficulty of integration or a desire not to remain with the combined company, the combined company’s business could be harmed and its ability to realize the anticipated benefits of the transaction could be adversely affected.

While the transaction is pending, Allergan will be subject to contractual restrictions, which could adversely affect Allergan’s business and operations.

Under the terms of the Transaction Agreement, Allergan is also subject to certain restrictions on the conduct of its business prior to completing the transaction, which may adversely affect its ability to execute certain of its business strategies, including the ability in certain cases to enter into contracts or incur capital expenditures to grow its business. Such limitations could negatively affect Allergan’s businesses and operations prior to the completion of the transaction. Furthermore, the process of planning to integrate two businesses and organizations for the post-transaction period can divert management attention and resources and could ultimately have an adverse effect on Allergan.

Risks Relating to the Combined Company Following the Transaction

If completed, the transaction may not achieve its intended results.

Allergan and AbbVie entered into the Transaction Agreement with the expectation that the transaction will result in various benefits, including, among other things, synergies at the combined company, a comprehensive product portfolio, diversified growth profile and broad geographic reach. Achieving the anticipated benefits of

 

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the transaction is subject to a number of uncertainties, including whether the businesses of AbbVie and Allergan can be integrated in an efficient and effective manner. Failure to achieve these anticipated benefits could result in increased costs or decreases in the amount of expected revenues and could adversely affect the combined company’s future business, financial condition, operating results and cash flows.

Allergan and AbbVie may be unable to successfully integrate their operations. Failure to successfully integrate the businesses of Allergan and AbbVie in the expected timeframe may adversely affect the future results of the combined organization, and, consequently, the value of the shares of AbbVie common stock that Allergan shareholders receive as the transaction consideration.

It is possible that the integration process could take longer than anticipated and could result in the loss of valuable employees, the disruption of each company’s ongoing businesses, processes and systems or inconsistencies in standards, controls, procedures, practices, policies and compensation arrangements, any of which could adversely affect the combined company’s ability to achieve the anticipated benefits of the transaction. The combined company’s results of operations could also be adversely affected by any issues attributable to either company’s operations that arise or are based on events or actions that occur prior to the completion of the transaction. The companies may have difficulty addressing possible differences in corporate cultures and management philosophies. The integration process is subject to a number of uncertainties, and no assurance can be given that the anticipated benefits will be realized or, if realized, the timing of their realization.

Allergan and AbbVie will incur substantial transaction fees and costs in connection with the transaction.

Allergan and AbbVie expect to incur a number of non-recurring substantial transaction-related costs associated with completing the transaction, combining the operations of the two organizations and achieving desired synergies. These fees and costs will be substantial. Non-recurring transaction costs include, but are not limited to, fees paid to legal, financial and accounting advisors, retention, severance, change in control and other integration-related costs, filing fees and printing costs. Additional unanticipated costs may be incurred in the integration of the businesses of Allergan and AbbVie. There can be no assurance that the elimination of certain duplicative costs, as well as the realization of other efficiencies related to the integration of the two businesses, will offset the incremental transaction-related costs over time. Thus, any net benefit may not be achieved in the near term, the long term or at all.

The pro forma financial statements included in this proxy statement are based on various assumptions that may not prove to be correct, and they are presented for illustrative purposes only and may not be an indication of the combined company’s financial condition or results of operations following the transaction.

The pro forma financial statements contained in this proxy statement are based on various adjustments, assumptions and preliminary estimates and may not be an indication of the combined company’s financial condition or results of operations following the transaction for several reasons. See “ Summary Unaudited Pro Forma Financial Data ” beginning on page 29. The actual financial condition and results of operations of the combined company following the transaction may not be consistent with, or evident from, these pro forma financial statements. In addition, the assumptions used in preparing the pro forma financial information may not prove to be accurate, and other factors may affect the combined company’s financial condition or results of operations following the transaction.

Following the transaction, the combined company will have a substantial amount of debt, which could adversely affect its business, financial condition or results of operations and prevent it from fulfilling its debt-related obligations.

Following the transaction, the combined company will have a substantial amount of debt. The combined company’s substantial debt could adversely affect it in a number of ways including but not limited to making it more difficult for the combined company to satisfy its obligations with respect to its debt or to its trade or other

 

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creditors and requiring a substantial portion of the combined company’s cash flows from operations and the proceeds of any capital markets offerings or loan borrowings for the payment of interest on the combined company’s debt. If the combined company cannot service its indebtedness, it may have to take actions such as selling assets, seeking additional debt or equity or reducing or delaying capital expenditures, strategic acquisitions, investments and alliances.

Certain Allergan agreements may contain change of control provisions that may be triggered by the transaction and, if not waived, could cause the combined company to lose the benefit of such agreements and incur liabilities and/or replacement costs, which could have an adverse effect on the combined company.

Allergan is party to, or may become party to after the date hereof, various agreements with third parties, including, among other agreements, certain license agreements, collaboration agreements, business development-related agreements, production and distribution related agreements, financing facilities, hedging arrangements, contracts for the performance of services material to the operations of Allergan and/or its affiliates and employment agreements that may contain change of control provisions that may be triggered upon the completion of the transaction. In the event that there is such a contract or arrangement requiring a consent or waiver in relation to the transaction, for which such consent or waiver was not obtained, the combined company could lose the benefit of the underlying agreement and incur liabilities or replacement costs, which could have an adverse effect on the operations of the combined company.

 

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SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA OF ABBVIE

The following table sets forth summary financial information for AbbVie as of and for the years ended December 31, 2018, 2017 and 2016 are derived from its audited consolidated financial statements as of and for the years ended December 31, 2018, 2017 and 2016. The summary interim financial information for the six months ended June 30, 2019 and June 30, 2018 has been derived from AbbVie’s unaudited condensed consolidated financial statements and includes, in the opinion of AbbVie’s management, all normal and recurring adjustments necessary for a fair statement of the financial information. The results for the six-month period do not necessarily indicate the results to be expected for the full year. You should read the following information in conjunction with AbbVie’s consolidated financial statements and related notes and other financial information incorporated by reference in this proxy statement. Historical results are not necessarily indicative of any results to be expected in the future. See “ Where You Can Find More Information ” beginning on page 149.

 

     As of and for the six
months ended June 30,
     As of and for the years ended
December 31,
 
           2019                  2018            2018      2017      2016  
     (in millions)  

Statement of earnings data

              

Net revenues

   $ 16,083      $ 16,212      $ 32,753      $ 28,216      $ 25,638  

Net earnings

   $ 3,197      $ 4,766      $ 5,687      $ 5,309      $ 5,953  

Balance sheet data

              

Total assets

   $ 57,142      $ 61,641      $ 59,352      $ 70,786      $ 66,099  

Long-term debt and finance lease obligations (1)

   $ 36,954      $ 33,598      $ 36,611      $ 36,968      $ 36,465  

 

(1)

Includes current portion of both long-term debt and finance lease obligations.

 

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SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA OF ALLERGAN

The following table sets forth summary financial information for Allergan as of and for the years ended December 31, 2018, 2017 and 2016 are derived from its audited consolidated financial statements as of and for the years ended December 31, 2018, 2017 and 2016. The summary interim financial information for the six months ended June 30, 2019 and June 30, 2018 has been derived from Allergan’s unaudited condensed consolidated financial statements and includes, in the opinion of Allergan’s management, all normal and recurring adjustments necessary for a fair statement of the financial information. The results for the six-month period do not necessarily indicate the results to be expected for the full year. You should read the following information in conjunction with Allergan’s consolidated financial statements and related notes and other financial information incorporated by reference in this proxy statement. Historical results are not necessarily indicative of any results to be expected in the future. See “ Where You Can Find More Information ” beginning on page 149.

 

     As of and for the six
months ended June 30,
    As of and for the years ended
December 31,
 
     2019     2018     2018
(1)(2)(3)
    2017
(4)(5)(6)(7)
    2016
(10)(11)(12)
 
     (in millions)  

Statement of earnings data

          

Net revenues

   $ 7,687.2     $ 7,796.3     $ 15,787.4     $ 15,940.7     $ 14,570.6  

Net (loss)/income attributable to ordinary shareholders

   $ (4,167.0   $ (805.0   $ (5,142.8   $ (4,403.9   $ 14,695.0  

Basic (loss)/Earnings per share

   $ (12.63   $ (2.39   $ (15.26   $ (13.19   $ 38.18  

Weighted average ordinary shares outstanding:

          

Diluted

     329.9       336.9       337.0       333.8       384.9  

Balance sheet data

          

Total assets

   $ 95,480.7     $ 108,858.8     $ 101,787.6     $ 118,341.9     $ 128,986.3  

Long-term debt and lease obligations

   $ 23,241.5     $ 25,350.5     $ 23,797.7     $ 30,075.3     $ 32,768.7  

 

(1)

In the year ended December 31, 2018, Allergan recorded impairment charges relating to its General Medicine Reporting Unit goodwill of $2.8 billion, an impairment of $771.7 million as a result of holding its Anti-Infectives business for sale, currently marketed intangibles assets of $1,831.4 million, including its Kybella ® /Belkyra ® asset of $1,643.8 million and IPR&D assets of $804.6 million, including $522.0 million relating to RORyt.

(2)

On September 20, 2018, Allergan completed the sale of five medical dermatology products in the U.S. to Almirall, S.A. As part of the sale, Allergan received cash consideration of $550.0 million and recorded a net gain of $129.6 million included as a component of “other income/(expense), net”.

(3)

In the year ended December 31, 2018, Allergan repurchased $2.74 billion or 16,772,162 shares as a result of Allergan’s share repurchase programs.

(4)

On April 28, 2017, Allergan completed the Zeltiq Acquisition for $2.4 billion through which it acquired Zeltiq’s body contouring business.

(5)

On February 1, 2017, Allergan completed the LifeCell Acquisition for $2.9 billion through which it acquired LifeCell’s regenerative medicines business.

(6)

In the year ended December 31, 2017, Allergan recognized intangible impairments including, but not limited to, $3,230.0 million related to Restasis ® , $170.0 million related to Dry Eye IPR&D assets, and $646.0 million related to Aczone ® .

(7)

In the year ended December 31, 2017, Allergan retired 6,822,394 shares as a result of Allergan’s share buyback programs.

(8)

On November 1, 2016, Allergan completed the Tobira Acquisition. The acquisition increased Allergan’s intangible assets with the addition of Cenicriviroc.

 

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(9)

On October 25, 2016, Allergan completed the Vitae Acquisition. The acquisition increased Allergan’s intangible assets with the addition of RORyt.

(10)

In the year ended December 31, 2016, Allergan retired 61,620,459 shares as a result of Allergan’s $15.0 billion share buyback programs.

(11)

On October 3, 2016, we completed the divestiture of the Anda Distribution business to Teva for $0.5 billion.

(12)

On August 2, 2016, Teva acquired our global generics business for $38.3 billion of cash and Teva shares.

 

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SUMMARY UNAUDITED PRO FORMA FINANCIAL DATA

The following selected unaudited pro forma financial data (“Selected Pro Forma Data”) give effect to the acquisition. The Selected Pro Forma Data have been prepared using the acquisition method of accounting under U.S. GAAP under which the assets and liabilities of Allergan are recorded by AbbVie at their respective fair values as of the date the acquisition is completed. The selected unaudited pro forma condensed combined balance sheet data as of June 30, 2019 give effect to the acquisition as if it had occurred on June 30, 2019. The selected unaudited pro forma condensed combined statements of earnings for the year ended December 31, 2018 and for the six months ended June 30, 2019 give effect to AbbVie’s results of operations as if the acquisition occurred on January 1, 2018. The historical consolidated financial information has been adjusted in the accompanying unaudited pro forma condensed combined financial information to give effect to pro forma events that are (i) directly attributable to the acquisition, (ii) factually supportable, and (iii) with respect to the unaudited pro forma condensed combined statements of earnings, are expected to have a continuing impact on the consolidated results.

The Selected Pro Forma Data have been derived from, and should be read in conjunction with, the more detailed unaudited pro forma condensed combined financial information of AbbVie appearing elsewhere in this proxy statement and the accompanying notes to the pro forma statements. In addition, the pro forma statements were based on, and should be read in conjunction with, the historical consolidated financial statements and related notes of both AbbVie and Allergan for the applicable periods, which have been incorporated in this proxy statement by reference. See the sections captioned “ Where You Can Find More Information ” and “ Unaudited Pro Forma Condensed Combined Financial Information ” beginning on pages 148 and 101 respectively in this proxy statement for additional information. The Selected Pro Forma Data have been presented for informational purposes only and are not necessarily indicative of what the combined company’s financial position or results of operations actually would have been had the acquisition been completed as of the dates indicated. In addition, the Selected Pro Forma Data do not purport to project the future financial position or operating results of the combined company. Also, as explained in more detail in the accompanying notes to the pro forma statements, the preliminary fair values of assets acquired and liabilities assumed reflected in the Selected Pro Forma Data are subject to adjustment and may vary significantly from the fair values that will be recorded upon completion of the acquisition. The Selected Pro Forma Data was prepared by AbbVie management and not prepared or approved by Allergan.

Selected Unaudited Pro Forma Condensed Combined Statement of Earnings

 

(in millions except for per share data)    Six months ended
June 30, 2019
(Unaudited Pro
Forma Combined)
     Year ended
December 31, 2018
(Unaudited Pro
Forma Combined)
 

Net revenues

   $ 23,770      $ 48,540  

Net earnings (loss)

   $ (2,376    $ (1,458

Earnings (loss) per share—basic

   $ (1.36    $ (0.85

Earnings (loss) per share—diluted

   $ (1.36    $ (0.85

Weighted-average shares outstanding—basic

     1,764        1,825  

Weighted-average shares outstanding—diluted

     1,764        1,825  

Selected Unaudited Pro Forma Condensed Combined Balance Sheet

 

(in millions)    As of June 30, 2019
(Unaudited Pro
Forma Combined)
 

Total assets

   $ 152,946  

Total liabilities

   $ 142,519  

Total equity (deficit)

   $ 10,427  

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement and the documents incorporated into it by reference contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 concerning AbbVie, Allergan, the acquisition and the other transactions contemplated by the Transaction Agreement that involve risks and uncertainties. All statements, trend analyses and other information contained herein about the markets for the services and products of AbbVie and Allergan and future trends, plans, events, results of operations or financial conditions, as well as other statements identified by the use of forward-looking terminology, including “anticipate,” “believe,” “plan,” “could,” “estimate,” “expect,” “goal,” “forecast,” “guidance,” “predict,” “project,” “intend,” “may,” “will,” “would,” “should,” “continue,” “pursue,” “possible,” “potential” or the negative of these terms or other similar words, phrases or expressions, constitute forward-looking statements. In particular, statements, express or implied, concerning future actions, conditions or events, future operating results, the ability to generate sales, income or cash flow, to realize cost savings or other benefits associated with the transaction or to pay dividends or repurchase shares are forward-looking statements. These forward-looking statements are not historical facts but instead represent only AbbVie’s and Allergan’s expectations, estimates and projections regarding future events, based on current beliefs of management, as well as assumptions made by, and information currently available to, management. These statements are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict, many of which are outside the control of AbbVie and Allergan, which may include the risk factors set forth above and other market, business, legal and operational uncertainties discussed elsewhere in this proxy statement and the documents which are incorporated herein by reference. Those uncertainties include, but are not limited to:

 

   

the inherent uncertainty associated with financial projections;

 

   

failure to satisfy one or more closing conditions with respect to the acquisition;

 

   

the inability to complete the acquisition on a timely basis or at all;

 

   

adverse regulatory decisions or developments;

 

   

the risk that the required regulatory approvals for the acquisition are not obtained, are delayed or are subject to conditions that are not anticipated;

 

   

product liability claims and concerns that may arise regarding the safety and efficacy of in-line products and product candidates;

 

   

the timing and success of product launches;

 

   

the difficulty of predicting the timing or outcome of product development efforts and regulatory agency approvals or actions, if any;

 

   

potential for adverse pricing movement;

 

   

difficulties or delays in manufacturing;

 

   

reduction or interruption in supply;

 

   

changes in tax laws or interpretations that could increase AbbVie’s, or Allergan’s consolidated tax liabilities;

 

   

the risk that the Allergan and AbbVie businesses will not be integrated successfully or that the estimated cost savings, synergies and benefits of the acquisition will not be realized in time or at all;

 

   

access to available financing (including financing for the acquisition or refinancing of AbbVie or Allergan debt) on a timely basis and on reasonable terms;

 

   

the combined company’s ability to refinance the bridge loan facilities on favorable terms (or at all) and maintain AbbVie’s current long-term credit ratings;

 

   

expectations regarding cash flow generation, accretion to cash earnings per share, capital structure and debt repayment following the closing of the acquisition;

 

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the timing and amount of any dividends or share repurchases;

 

   

unanticipated changes in the markets for AbbVie’s and Allergan’s business segments;

 

   

the anticipated size of the markets and continued demand for AbbVie’s and Allergan’s products;

 

   

unanticipated downturns in business relationships with customers or their purchases from AbbVie or Allergan;

 

   

the ability to execute and realize the expected benefits from strategic initiatives, as well as revenue growth plans and cost control and productivity improvement programs;

 

   

the possibility that other strategic opportunities will not be pursued;

 

   

the risks and uncertainties normally incident to the pharmaceutical industry, including industry competition and competitive pressures on AbbVie’s and Allergan’s sales and pricing;

 

   

reduction, interruption or increase in the cost of material, energy and other production costs, or unexpected costs that cannot be recouped in product pricing;

 

   

the availability and pricing of third-party sourced products and materials;

 

   

the risks of fluctuations in foreign currency exchange rates;

 

   

the magnitude of any disruptions from manufacturing rationalizations;

 

   

the ability to develop and introduce new products;

 

   

changes in the mix of products sold;

 

   

variability of trade buying patterns;

 

   

the introduction of competing technologies;

 

   

the impact of competitive products and pricing;

 

   

unexpected technical or marketing difficulties;

 

   

unexpected claims, charges, litigation or dispute resolutions;

 

   

the difficulty of predicting the timing or outcome of pending or future litigation or government investigations;

 

   

costs and efforts to defend or enforce intellectual property rights;

 

   

product quality problems and changes in R&D spend;

 

   

political developments;

 

   

changing legislation and governmental regulations;

 

   

changes in capital markets conditions (including currency exchange rate fluctuations), inflation and interest rates;

 

   

the loss of key senior management or scientific staff;

 

   

risks associated with international operations;

 

   

risks associated with self-insurance and commercial insurance;

 

   

successful compliance with governmental regulations applicable to AbbVie’s and Allergan’s facilities, products and/or businesses;

 

   

changes in the laws and regulations, affecting among other things, pricing and reimbursement of pharmaceutical products;

 

   

health care policy changes;

 

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exposure to fluctuations in energy prices;

 

   

volatility of end markets that AbbVie and Allergan serve;

 

   

adverse effects on the market price of AbbVie’s shares of common stock or Allergan’s ordinary shares and on AbbVie’s or Allergan’s operating results because of a failure to complete the possible acquisition;

 

   

negative effects relating to the announcement of the possible acquisition or any further announcements relating to the possible acquisition or the consummation of the possible acquisition on the market price of AbbVie’s shares of common stock or Allergan’s ordinary shares;

 

   

significant transaction costs and/or unknown or inestimable liabilities;

 

   

potential litigation associated with the possible acquisition; and

 

   

general political, economic and business conditions that affect the combined company following the consummation of the possible acquisition.

The above list of factors is not exhaustive. You should carefully consider the factors and the other risks and uncertainties that affect our businesses described herein and in AbbVie’s and Allergan’s most recent Annual Reports on Form 10-K and other documents filed from time to time with the SEC or incorporated herein by reference.

 

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PART 1—THE TRANSACTION AND THE SPECIAL MEETINGS

THE SPECIAL MEETINGS OF ALLERGAN’S SHAREHOLDERS

Overview

This proxy statement is being provided to Allergan shareholders as part of a solicitation of proxies by the Allergan board of directors (excluding Thomas C. Freyman due to his ownership of AbbVie shares) for use at the special meetings of Allergan shareholders referred to below and at any adjournments of such meetings. For the purposes of this proxy statement, each reference to the Allergan board of directors (or any meeting thereof) is intended to refer to that board or meeting without any participation, recommendation or solicitation, as the case may be, by Mr. Freyman who has recused himself from such participation, recommendation or solicitation. This proxy statement is being furnished to Allergan shareholders on or about [                    ], 2019. This proxy statement provides Allergan shareholders with information they need to be able to vote or instruct their vote to be cast at the special meetings.

Date, Time and Place of the Special Meetings

A special Court-ordered meeting of Allergan shareholders has been convened for [                    ] at [                    ] local time, at [                    ]. Allergan has also convened an extraordinary general meeting of shareholders on [                    ] at [                    ] local time, at [                    ], or, if the special Court-ordered meeting has not concluded by [                    ] local time, as soon as possible after the conclusion or adjournment of the special Court-ordered meeting.

Attendance

Attendance at the special Court-ordered meeting and the extraordinary general meeting is limited to Allergan shareholders on the Allergan record date. Please indicate on the proxy cards if you plan to attend the special meetings. If your shares are held through a bank, broker or other nominee, and you would like to attend, please write to Allergan plc, Corporate Secretary, Clonshaugh Business and Technology Park, Coolock, Dublin, D17 E400, Ireland, or bring to the applicable meeting a statement or a letter from the bank, broker or other nominee confirming beneficial ownership of the Allergan shares as of the Allergan record date for the meetings. Any beneficial holder who plans to vote at either meeting must obtain a legal proxy from his or her bank, broker or other nominee and should contact such bank, broker or other nominee for instructions on how to obtain a legal proxy. Each Allergan shareholder may be asked to provide a valid picture identification, such as a driver’s license or passport and proof of ownership as of the Allergan record date. The use of cell phones, smartphones, pagers, recording and photographic equipment will not be permitted in the meeting rooms.

Proposals

Special Court-Ordered Meeting : Allergan shareholders (excluding AbbVie or any of its affiliates, to the extent they hold Allergan ordinary shares) are being asked to consider and vote on a proposal at the special Court-ordered meeting to approve the scheme of arrangement.

Extraordinary General Meeting : Allergan shareholders (including AbbVie and any of its affiliates, to the extent they hold Allergan ordinary shares) are also being asked to consider and vote on a proposal at the extraordinary general meeting to approve the scheme of arrangement, in addition to certain other proposals as set forth in the resolutions described below.

The first three resolutions relate to the approval of the scheme of arrangement and of actions required to be taken in connection with the scheme—specifically, both the cancellation of the shares of Allergan that are not already owned by AbbVie or its affiliates and the subsequent allotment and issuance of new shares of Allergan to Acquirer Sub and/or its nominee(s) in exchange for the scheme consideration. The fourth resolution also relates

 

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to the scheme of arrangement and would ensure that the holders of any new ordinary shares of Allergan issued on or after the Voting Record Time (as defined in the scheme of arrangement) to persons other than Acquirer Sub or its nominees are acquired by Acquirer Sub or its nominees for the scheme consideration. The acquisition is conditioned on approval of resolutions 1 through 4.

 

  1.

Resolution #1: To approve the scheme of arrangement and authorize the directors of Allergan to take all such actions as they consider necessary or appropriate for carrying the scheme of arrangement into effect.

 

  2.

Resolution #2: To approve the cancellation of any Allergan ordinary shares in issue at 11:59 p.m., Irish time, on the day before the Irish High Court hearing to sanction the scheme (excluding, in any case, any Allergan ordinary shares which are held from time to time by AbbVie, Acquirer Sub or any other subsidiary of AbbVie).

 

  3.

Resolution #3: To authorize the directors of Allergan to allot and issue new Allergan shares, fully paid up, to Acquirer Sub and/or its nominee(s) in connection with effecting the scheme.

 

  4.

Resolution #4: To amend the articles of association of Allergan so that any ordinary shares of Allergan that are issued on or after the Voting Record Time (as defined in the scheme of arrangement) to persons other than Acquirer Sub or its nominees will either be subject to the terms of the scheme or will be immediately and automatically acquired by Acquirer Sub and/or its nominee(s) for the scheme consideration.

The acquisition is not conditioned on approval of the remaining resolutions.

 

  5.

Resolution #5: To approve, on a non-binding, advisory basis, specified compensatory arrangements between Allergan and its named executive officers relating to the transaction.

 

  6.

Resolution #6: To approve any motion by the Chairman to adjourn the extraordinary general meeting, or any adjournments thereof, to another time and place if necessary or appropriate to solicit additional proxies if there are insufficient votes at the time of the extraordinary general meeting to approve resolutions 1 through 4 set out above.

Record Date; Outstanding Ordinary Shares; Ordinary Shares Entitled to Vote

Only holders of Allergan ordinary shares as of [                    ] (Eastern Time in the U.S.) on [                    ], 2019, the record date for the special meetings, will be entitled to notice of, and to vote at the special meetings or any adjournments thereof. On the Allergan record date, there were [                    ] Allergan ordinary shares outstanding, held by [                    ] holders of record. Each outstanding Allergan ordinary share (including AbbVie and any of its affiliates, to the extent they hold Allergan ordinary shares) is entitled to one vote on each proposal and any other matter properly coming before the special meetings.

Quorum

Two or more holders of Allergan ordinary shares outstanding, present in person or by proxy, entitling them to exercise a majority of the voting power of Allergan on the Allergan record date will constitute a quorum for each of the special meetings. Allergan does not currently hold any ordinary shares in treasury; such shares would not be included in the calculation of the number of ordinary shares present at the special meetings for the purposes of determining a quorum. Allergan’s inspector of election intends to treat as “present” for these purposes shareholders who have submitted properly executed or transmitted proxies that are marked “abstain.” The inspector will also treat as “present” shares held in “street name” by brokers that are voted on at least one proposal to come before the meeting.

Ordinary Share Ownership and Voting by Allergan’s Directors and Officers

As of the Voting Record Time, the full Allergan board of directors and executive officers had the right to vote approximately [                    ] of the then-outstanding Allergan ordinary shares at the special meetings,

 

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representing approximately [                    ] percent ([    ]%) of the Allergan ordinary shares then outstanding and entitled to vote at the special Court-ordered meeting and approximately [    ]% of the Allergan ordinary shares then outstanding and entitled to vote at the extraordinary general meeting. The Allergan board of directors and executive officers who are shareholders of Allergan intend to vote “FOR” the scheme of arrangement at the special Court-ordered meeting, “FOR” the scheme of arrangement at the extraordinary general meeting, “FOR” the cancellation of any Allergan ordinary shares in issue at 11:59 p.m., Irish time, on the day before the Irish High Court hearing to sanction the scheme (excluding, in any case, any Allergan ordinary shares which are held from time to time by AbbVie, Acquirer Sub or any other subsidiary of AbbVie, if any), “FOR” the authorization of the directors of Allergan to allot and issue new Allergan shares, fully paid up, to Acquirer Sub and/or its nominee(s) in connection with effecting the scheme, “FOR” the amendment of the articles of association of Allergan so that any ordinary shares of Allergan that are issued on or after the Voting Record Time (as defined in the scheme of arrangement) to persons other than Acquirer Sub or its nominees will either be subject to the terms of the scheme or will be immediately and automatically acquired by Acquirer Sub and/or its nominee(s) for the scheme consideration, “FOR” the non-binding, advisory proposal approving specified compensatory arrangements between Allergan and its named executive officers, and “FOR” the proposal to approve any motion by the Chairman to adjourn the extraordinary general meeting, or any adjournments thereof, to another time and place if necessary or appropriate to solicit additional proxies if there are insufficient votes at the time of the extraordinary general meeting to approve the scheme of arrangement or the other resolutions set out above, other than the advisory vote on specified compensatory arrangements.

Vote Required; Recommendation of the Allergan Board of Directors

Special Court-Ordered Meeting

Proposal to approve the scheme of arrangement : Allergan shareholders are being asked to vote on a proposal to approve the scheme at both the special Court-ordered meeting and at the extraordinary general meeting. The vote required for such proposal is different at each of the meetings, however. As set out in full under the section entitled “ Part 2—Explanatory Statement—Consents and Special Meetings ” beginning on page 154, in order for the resolution at the special Court-ordered meeting to pass, those voting to approve the scheme must: (a) represent a simple majority (being more than fifty percent (50%)) in number of the Allergan shareholders of record as of the Voting Record Time, present and voting (in person or by proxy), and (b) represent three-fourths (seventy-five percent (75%)) or more in value of the Allergan ordinary shares held by such holders, as of the Voting Record Time, present and voting (in person or by proxy).

Because the vote required to approve the proposal at the special Court-ordered meeting is based on votes properly cast at the meeting, and because abstentions and broker non-votes are not considered votes properly cast, abstentions and broker non-votes, along with failures to vote, will have no effect on such proposal.

The acquisition is conditioned on approval of the scheme at the special Court-ordered meeting.

The Allergan board of directors recommends that Allergan shareholders vote “FOR” the proposal to approve the scheme of arrangement at the special Court-ordered meeting.

In considering the recommendation of the Allergan board of directors, you should be aware that certain directors and executive officers of Allergan have interests in the proposed transaction that are in addition to, or different from, any interests they might have as shareholders. See “ The Transaction—Interests of Certain Persons in the Transaction ” beginning on page 61. In particular, Thomas C. Freyman is not participating in the recommendation of the Allergan board of directors due to Mr. Freyman’s shareholding of AbbVie.

 

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Extraordinary General Meeting

Set forth below is a table summarizing certain information with respect to the resolutions:

 

Resolution

#

  

Resolution

  

Ordinary or
Special
Resolution?

  

Transaction
Conditioned on
Approval of
Resolution?

1    Approve the scheme of arrangement and authorize the directors of Allergan to take all such actions as they consider necessary or appropriate for carrying the scheme of arrangement into effect.    Ordinary    Yes
2    Approve the cancellation of any Allergan ordinary shares in issue at 11:59 p.m., Irish time, on the day before the Irish High Court hearing to sanction the scheme (excluding, in any case, any Allergan ordinary shares which are held from time to time by AbbVie, Acquirer Sub or any other subsidiary of AbbVie, if any).    Special    Yes
3    Authorize the directors of Allergan to allot and issue new Allergan shares, fully paid up, to Acquirer Sub and/or its nominee(s) in connection with effecting the scheme.    Ordinary    Yes
4    Amend the articles of association of Allergan so that any ordinary shares of Allergan that are issued on or after the Voting Record Time (as defined in the scheme of arrangement) to persons other than Acquirer Sub or its nominees will either be subject to the terms of the scheme or will be immediately and automatically acquired by Acquirer Sub and/or its nominee(s) for the scheme consideration.    Special    Yes
5    Approve, on a non-binding, advisory basis, specified compensatory arrangements between Allergan and its named executive officers relating to the transaction.    Ordinary    No
6    Approve any motion by the Chairman to adjourn the extraordinary general meeting, or any adjournments thereof, to solicit additional proxies in favor of the approval of the Resolutions if there are insufficient votes at the time of the extraordinary general meeting to approve resolutions 1 through 4.    Ordinary    No

At the extraordinary general meeting, the requisite approval of each of the resolutions depends on whether it is an “ordinary resolution” (resolutions 1, 3, 5 and 6), which requires the approval of at least a majority of the votes cast by the holders of Allergan ordinary shares present and voting, either in person or by proxy, or a “special resolution” (resolutions 2 and 4), which requires the approval of at least seventy-five percent (75%) of the votes cast by the holders of Allergan ordinary shares present and voting, either in person or by proxy.

For all the resolutions, because the votes required to approve such resolutions are based on votes properly cast at the extraordinary general meeting, and because abstentions and broker non-votes are not considered votes properly cast, abstentions and broker non-votes, along with failures to vote, will have no effect on the resolutions.

The Allergan board of directors recommends that Allergan shareholders vote “FOR” the proposals to approve each of the resolutions.

In considering the recommendations of the Allergan board of directors described above, you should be aware that certain directors and executive officers of Allergan have interests in the proposed transaction that are

 

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in addition to, or different from, any interests they might have as shareholders. See “ The Transaction—Interests of Certain Persons in the Transaction ” beginning on page 61. In particular, Thomas C. Freyman is not participating in the recommendation of the Allergan board of directors as Mr. Freyman is regarded under Rule 3 of the Irish Takeover Rules as having a conflict of interest due to Mr. Freyman’s shareholding of AbbVie.

Voting Your Ordinary Shares

Allergan shareholders may vote by proxy or in person at each special meeting. Allergan recommends that you submit your proxy even if you plan to attend either or both special meeting. If you vote by proxy, you may change your vote, among other ways, if you attend and vote at either or both special meeting.

If you own shares in your own name, you are considered, with respect to those shares, the “shareholder of record.” If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in “street name.”

If you are an Allergan shareholder of record you may use the enclosed proxy cards to tell the persons named as proxies how to vote your shares. If you are an Allergan shareholder of record, the shares listed on your proxy cards will include, if applicable, shares held in a book-entry account at Computershare Trust Company, N.A., Allergan’s transfer agent.

If you properly complete, sign and date your proxy cards, your shares will be voted in accordance with your instructions. The named proxies will vote all shares at the meeting for which proxies have been properly submitted and not revoked. If you sign and return your proxy cards appointing the Chairman as your proxy but do not mark your cards to tell the proxy how to vote on a voting item, your shares will be voted in respect of such voting item at the discretion of the Chairman.

Allergan shareholders may also vote over the internet at www.proxyvote.com or by telephone at 1-800-690-6903 anytime up to 3:59 p.m. (Eastern Time in the U.S.) on the day immediately preceding each special meeting. Voting instructions are printed on the proxy cards or voting information form you received. Either method of submitting a proxy will enable your shares to be represented and voted at the special meetings. You may also hand your applicable completed and signed proxy card to the Chairman of the applicable special meeting before the start of the applicable special meeting.

Voting Ordinary Shares Held in Street Name

If your shares are held in an account through a bank, broker or other nominee, you must likewise instruct the bank, broker or other nominee how to vote your shares by following the instructions that the bank, broker or other nominee provides you along with this proxy statement. Your bank, broker or other nominee, as applicable, may have an earlier deadline by which you must provide instructions to it as to how to vote your shares, so you should read carefully the materials provided to you by your bank, broker or other nominee.

If you do not provide a signed voting instruction form to your bank, broker or other nominee, your shares will not be voted on any proposal on which the bank, broker or other nominee does not have discretionary authority to vote. This is referred to in this proxy statement and in general as a broker non-vote. In these cases, the bank, broker or other nominee will not be able to vote your shares on those matters for which specific authorization is required. Brokers do not have discretionary authority to vote on any of the proposals at either special meeting.

Accordingly, if you fail to provide a signed voting instruction form to your bank, broker or other nominee, your shares held through such bank, broker or other nominee will not be voted at either special meeting.

 

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Revoking Your Proxy

If you are an Allergan shareholder of record, you may revoke your proxy at any time before it is voted at the special Court-ordered meeting or at any time before your proxy is voted at the extraordinary general meeting by:

 

   

delivering a written revocation letter to the Allergan Corporate Secretary;

 

   

submitting your voting instructions again by telephone or over the internet;

 

   

signing and returning by mail one or both proxy cards with a later date so that it is received prior to the applicable special meeting; or

 

   

attending the applicable special meeting and voting by ballot in person.

Attendance at either special meeting will not, in and of itself, revoke a proxy or change your voting instructions; you must vote by ballot at the applicable meeting to change your vote.

If your shares are held in “street name” by a bank, broker or other nominee, you should follow the instructions of your bank, broker or other nominee regarding the revocation of proxies.

Costs of Solicitation

Allergan will bear the cost of soliciting proxies from its shareholders.

Allergan will solicit proxies by mail. In addition, the directors, officers and employees of Allergan may solicit proxies from its shareholders by telephone, electronic communication, or in person, but will not receive any additional compensation for their services. Allergan will make arrangements with brokerage houses and other custodians, nominees and fiduciaries for forwarding proxy solicitation material to the beneficial owners of Allergan ordinary shares held of record by those persons and will reimburse them for their reasonable out-of-pocket expenses incurred in forwarding such proxy solicitation materials.

Allergan has engaged a professional proxy solicitation firm MacKenzie Partners, to assist in soliciting proxies for a fee of approximately $75,000. In addition, Allergan will reimburse MacKenzie Partners for its reasonable disbursements.

Other Business

Allergan is not aware of any other business to be acted upon at the special meetings. If, however, other matters are properly brought before the special meetings, the proxies will have discretion to vote or act on those matters according to their best judgment and they intend to vote the shares as the Allergan board of directors may recommend.

Adjournment

Any adjournment of the special Court-ordered meeting will result in an adjournment, as applicable, of the extraordinary general meeting.

Assistance

If you need assistance in completing your proxy cards or have questions regarding Allergan’s special meetings, please contact MacKenzie Partners, the proxy solicitation agent for Allergan, by mail at 1407 Broadway – 27th Floor, New York, New York 10018, by telephone at (800) 322-2885 (toll-free) or (212) 929-5500 (collect), or by email at proxy@mackenziepartners.com.

 

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THE TRANSACTION

The Acquisition

On June 25, 2019, Allergan entered into the Transaction Agreement by and among Allergan, AbbVie and Acquirer Sub. Under the terms of the Transaction Agreement, Acquirer Sub will acquire Allergan pursuant to a scheme of arrangement under Chapter 1 of Part 9 of the Irish Companies Act 2014 (the “Act”) and a capital reduction under Sections 84 to 86 of the Act (collectively referred to as the “scheme” or “scheme of arrangement”). As a result of the scheme, Allergan will become a wholly owned subsidiary of AbbVie.

At the effective time, Allergan shareholders will be entitled to receive (i) $120.30 in cash and (ii) 0.8660 of a newly issued share of AbbVie common stock, in exchange for each Allergan ordinary share held by such Allergan shareholders. If the payment of the scheme consideration would result in the issuance of AbbVie common stock in excess of 19.99% of the aggregate shares of AbbVie common stock outstanding immediately prior to the completion (as reasonably determined by AbbVie) (referred to as the “share cap”), the exchange ratio of 0.8660 will be reduced by the smallest number (rounded to the nearest 0.0001) that causes the total number of shares of AbbVie common stock issuable in the acquisition to not exceed the share cap, and the cash consideration described above would then be increased by an amount in cash equal to that number multiplied by the ten (10) day volume-weighted average price of AbbVie common stock starting with the opening of trading on the eleventh (11th) trading day prior to the completion date to the closing of trading on the second-to-last trading day prior to the completion date.

Allergan equity awards will be treated as set forth in the Transaction Agreement, such that (i) each Allergan option and each Allergan restricted stock unit award that is outstanding immediately prior to the effective time will be substituted by AbbVie with a corresponding award relating to shares of AbbVie common stock, with the number of shares of AbbVie common stock subject to such award and, if applicable, the exercise price applicable to such award, determined in accordance with the formulas set forth in the Transaction Agreement and (ii) each Allergan performance stock unit award that is outstanding as of immediately prior to the effective time will be substituted by AbbVie with an AbbVie restricted stock unit award that vests based on the holder’s continued service following the effective time and relates to a number of shares of AbbVie common stock determined in accordance with the formula set forth in the Transaction Agreement, in each case, as further described below.

At the effective time, each Allergan stock option, whether vested or unvested, that is outstanding and unexercised immediately prior to the effective time, will be substituted by AbbVie with an AbbVie stock option (a “substituted AbbVie stock option”). The number of shares of AbbVie common stock subject to such substituted AbbVie stock option will equal (i) the number of Allergan ordinary shares (rounded down to the nearest whole share) subject to the Allergan stock option immediately prior to the effective time multiplied by (ii) the “equity award conversion ratio” (as defined below). The exercise price applicable to such substituted AbbVie stock option will equal (i) the exercise price of such Allergan stock option immediately prior to the effective time divided by (ii) the equity award conversion ratio (rounded up to the nearest whole cent).

“Allergan share awards” consist of Allergan restricted stock unit awards and Allergan performance stock unit awards. At the effective time, each Allergan share award that is outstanding immediately prior to the effective time will be substituted by AbbVie with an AbbVie restricted stock unit award (a “substituted AbbVie share award”). The number of shares of AbbVie common stock subject to such substituted AbbVie share award will equal (i) the number of Allergan ordinary shares (rounded up to the nearest whole share) subject to the Allergan share award immediately prior to the effective time multiplied by (ii) the equity award conversion ratio. Each Allergan performance stock unit award will be substituted by AbbVie with an AbbVie restricted stock unit award that vests based on the holder’s continued service (and not subject to satisfaction of any performance-based vesting conditions), and for any performance stock unit awards that were subject to performance-based vesting conditions on June 25, 2019, any applicable performance metrics will be deemed satisfied at one hundred thirty percent (130%) of target as of the effective time.

 

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Following the effective time, the substituted AbbVie stock options and substituted AbbVie share awards will have the same terms and conditions (including, for any performance stock unit awards, the same time-based vesting conditions, but excluding any performance-based vesting conditions, as described above) as applied to the corresponding Allergan stock option or Allergan share award immediately prior to the effective time, except for immaterial administrative or ministerial changes that are not adverse to any holder other than in any de minimis respect.

The “equity award conversion ratio” is equal to the sum (rounded to the nearest one thousandth) of (i) the exchange ratio specified in the Transaction Agreement (currently 0.8660) and (ii) the quotient obtained by dividing (A) the per share cash consideration payable under the Transaction Agreement ($120.30) by (B) the volume-weighted average price of a share of AbbVie common stock for the ten (10) trading day period starting with the opening of trading on the eleventh (11th) trading day prior to the completion date to the closing of trading on the second to last trading day prior to the completion date.

AbbVie reserves the right, subject to the prior written approval of the Irish Takeover Panel (if required), to effect the acquisition by way of a takeover offer, as an alternative to the scheme, in the circumstances described in and subject to the terms of the Transaction Agreement. In such event, such takeover offer will be implemented on terms and conditions that are at least as favorable to Allergan shareholders and equity award holders (except for an acceptance condition set at eighty percent (80%) of the nominal value of the Allergan shares to which such offer relates and which are not already beneficially owned by AbbVie) as those which would apply in relation to the scheme, among other requirements.

Background of the Transaction

The Allergan board of directors and Allergan management have, on an ongoing basis, considered the long-term strategy of Allergan and strategic opportunities that might be available to it to enhance shareholder value, including investments in new growth opportunities, potential acquisitions, the possible sale of Allergan and/or a potential spin-off of certain of Allergan’s businesses.

On March 13, 2019, Mr. Richard A. Gonzalez, Chairman and Chief Executive Officer of AbbVie, called Mr. Brenton L. Saunders, Chairman, President and Chief Executive Officer of Allergan, to discuss market speculation regarding a variety of potential strategic opportunities Allergan may be considering. Mr. Gonzalez indicated that if Allergan were to become interested in exploring a strategic transaction, AbbVie may be interested in discussing a possible strategic relationship between Allergan and AbbVie.

On April 22, 2019, Mr. Gonzalez and Mr. Saunders met in person. Mr. Gonzalez noted to Mr. Saunders that AbbVie may be interested in exploring a possible acquisition of Allergan, but Mr. Gonzalez did not make a proposal.

On May 1, 2019, at a regularly scheduled meeting of the Allergan board of directors, Mr. Saunders apprised the directors of his discussions with Mr. Gonzalez. The Allergan board of directors expressed interest in exploring the possibility of a transaction with AbbVie and authorized the management of Allergan to engage in further discussions with AbbVie, and proposed that Mr. Saunders update the Mergers and Acquisitions Committee of the Allergan board of directors (the “M&A Committee”), comprised of Robert J. Hugin as Chairman, Christopher J. Coughlin, Thomas C. Freyman and Michael E. Greenberg, PhD (which had previously been formed to provide focused oversight on mergers, acquisitions, divestitures and other transactions), on further discussions and developments with respect to a potential transaction with AbbVie until such time as the discussions advance to require input from the Allergan board of directors.

On May 3, 2019, Mr. Saunders contacted Mr. Gonzalez to continue the discussion regarding a possible acquisition of Allergan by AbbVie. Over the next few weeks, Messrs. Gonzalez and Saunders engaged in a series of telephonic discussions to consider the possible timing and logistics for negotiating such a transaction, and the

 

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possible signing of a confidentiality agreement in the future, although price was not discussed. Mr. Saunders and Mr. Gonzalez agreed to plan to meet later in the month.

On May 9 and May 15, 2019, the M&A Committee held special telephonic information sessions during which Mr. Saunders updated the M&A Committee on his continuing discussions with Mr. Gonzalez. Mr. Saunders informed the M&A Committee that he and Mr. Gonzalez agreed to meet later in the month, at which point Mr. Saunders anticipated that Mr. Gonzalez would be in a position to make a proposal.

On May 28, 2019, Mr. Gonzalez and Mr. Saunders met in person. During the meeting, Mr. Gonzalez indicated to Mr. Saunders that, among other strategic alternatives AbbVie was considering, AbbVie may be interested in pursuing an acquisition of Allergan at a price in the range of $174 – 178.50 per Allergan share, representing a premium of 28 – 32% to Allergan’s then-market value, with approximately two-thirds of the consideration in cash and one-third of the consideration in AbbVie shares. Mr. Gonzalez also expressed a desire to move quickly and to promptly commence due diligence. Mr. Saunders informed Mr. Gonzalez that the Allergan board of directors was unlikely to be interested in a transaction at that price, but may be interested in a transaction at a higher price. Mr. Gonzalez expressed that AbbVie would be open to revisiting the issue upon completion of diligence.

The M&A Committee held a special telephonic information session on May 29, 2019. At this session, Mr. Saunders updated the M&A Committee on his meeting with Mr. Gonzalez on May 28, 2019 and his plan to continue to have discussions with AbbVie to explore the possibility of receiving an improved offer. Mr. Saunders also updated the M&A Committee that the Company had been working with J.P. Morgan Securities LLC (“J.P. Morgan”) to help consider whether there was a potential transaction with AbbVie that could be beneficial to holders of Allergan ordinary shares and also that the Company had been working with Wachtell, Lipton, Rosen & Katz (“Wachtell Lipton”) to consider certain legal questions regarding a potential transaction. Following discussion, Mr. Saunders also advised the M&A Committee that he would schedule an update call to discuss the AbbVie proposal with the entire Allergan board of directors.

On May 30, 2019, Mr. Gonzalez and Mr. Saunders spoke by telephone about next steps in exploring a possible transaction, including the proposed entry into a mutual confidentiality agreement and a proposed mutual due diligence plan.

Later on May 30, 2019, Allergan and AbbVie entered into a mutual confidentiality agreement. Following the execution of the confidentiality agreement and through the execution of the Transaction Agreement on June 25, 2019, representatives of AbbVie and Allergan (including their respective advisors) conducted due diligence on Allergan and AbbVie, respectively.

On June 2, 2019, the Allergan board of directors held a special telephonic meeting. Mr. Saunders described for the Allergan board of directors the conversations to date with AbbVie and discussed the possibility of progressing negotiations with AbbVie in connection with a possible acquisition. At this meeting, members of management reviewed with the Allergan board of directors the proposed mutual due diligence plan. The Allergan board of directors requested that Mr. Saunders continue to keep the Allergan board of directors apprised, either directly or via the M&A Committee, of further discussions and developments with respect to a potential transaction with AbbVie.

Later on June 2, 2019, Mr. Gonzalez and Mr. Saunders spoke by telephone, and on June 3, 2019, Mr. Gonzalez and Mr. Saunders met in person, to discuss the next steps in exploring a possible acquisition by AbbVie of Allergan. Mr. Saunders and Mr. Gonzalez agreed to plan to meet on June 7, 2019 to discuss further. During the week of June 3, 2019, members of the AbbVie and Allergan management teams met in person. During these meetings, members of Allergan management presented to AbbVie’s management team information concerning, among other things, Allergan’s internal management structure, portfolio, business strategy, product pipeline, various financial metrics and financial outlook and Allergan’s perspective as to the strategic rationale for AbbVie’s potential acquisition of Allergan.

 

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On June 4, 2019, the M&A Committee held a special telephonic information session, also attended by representatives of Wachtell Lipton and members of Allergan management. At this session, the M&A Committee received an update from Mr. Saunders on the status of the due diligence process with AbbVie. The M&A Committee also noted that an update session with the entire Allergan board of directors in the next week with presentations by J.P. Morgan would be appropriate and provided guidance to management on the analyses that the entire Allergan board of directors would find most useful.

On June 7, 2019, Mr. Gonzalez and Mr. Saunders met in person and discussed various matters relating to a possible transaction, including potential synergies, the business strategy of the combined company and the structure and timing of a possible transaction. At this meeting, Mr. Gonzalez updated Mr. Saunders on the preliminary findings of AbbVie’s due diligence process and noted that AbbVie would be interested in pursuing an acquisition at an implied price of $184.00 per Allergan share (with approximately two-thirds of the consideration in cash and one-third of the consideration in AbbVie shares), subject to satisfactory completion of due diligence, negotiation of mutually acceptable definitive written agreements and receipt of board approvals from both companies. During this discussion, Mr. Saunders requested that AbbVie offer a higher price so that Mr. Saunders could then present a revised proposal to the Allergan board of directors. On June 8, 2019, Mr. Gonzalez reiterated that the current proposal was still $184.00, but conveyed to Mr. Saunders that, subject to further discussions with the AbbVie board of directors and the results of ongoing due diligence, AbbVie might be able to reach an implied price of $186.00 per Allergan share (consisting of the same cash-stock mix).

On June 9, 2019 the Allergan board of directors held a special telephonic meeting, also attended by representatives of Wachtell Lipton. All members of the Allergan board of directors were present except for Thomas C. Freyman, who recused himself from this and all subsequent meetings and information sessions regarding a potential transaction with AbbVie in light of his ownership of AbbVie shares (which fact had previously been disclosed to the Allergan board of directors). For purposes of the remainder of this section, each reference to the Allergan board of directors (or any information session or meeting thereof) is intended to refer to that board, information session or meeting without any participation by Mr. Freyman who on and after such time did not participate in such information sessions, board meetings and deliberations as a result of his recusal. Mr. Saunders updated the Allergan board of directors on his discussions with the AbbVie management team, including that AbbVie had indicated the possibility of increasing its offer to an implied price of $186.00 per Allergan share (with approximately two-thirds of the consideration in cash and one-third of the consideration in AbbVie shares). A discussion ensued regarding valuation and the presentations that were expected to be made by management and J.P. Morgan at a special in-person meeting scheduled for June 11. At the conclusion of the meeting, the Allergan board of directors noted that Allergan management and Allergan’s advisors should continue discussions and negotiations with AbbVie with a view to obtaining a higher valuation, and requested that Mr. Saunders continue to keep the Allergan board of directors apprised of further discussions and developments with respect to a potential transaction with AbbVie.

On June 11, 2019, the Allergan board of directors held a special board meeting attended in person or telephonically by members of the Allergan board of directors, members of Allergan management, and representatives of Wachtell Lipton and J.P. Morgan. Mr. Saunders and other members of Allergan management reviewed with the Allergan board of directors the latest management projections, which illustrated the views of Allergan’s management regarding a plausible range of outcomes for Allergan’s business. Also during this meeting, representatives of J.P. Morgan provided an update on recent M&A activity in the healthcare industry and an overview of AbbVie. In addition, representatives of J.P. Morgan reviewed with the Allergan board of directors certain preliminary analyses with respect to a potential combination with AbbVie. In addition, representatives of J.P. Morgan reviewed with the Allergan board of directors key metrics for evaluating a potential proposal from AbbVie. Representatives of Wachtell Lipton also discussed with the Allergan board of directors an overview of the duties of directors in the context of the proposed transaction with AbbVie. Detailed discussions ensued throughout this meeting, between management, the directors and the advisers present, including with respect to alternative strategic options that Allergan might consider, such as a spin-off of certain of its businesses and whether there may be other potential parties interested in acquiring Allergan that should be

 

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contacted prior to Allergan entering into any definitive agreement with AbbVie. The Allergan board of directors also discussed, as a means to obtain a higher valuation from AbbVie, whether a contingent value right concept would be appropriate. At the conclusion of the meeting, the Allergan board of directors instructed Allergan management and Allergan’s advisors to continue discussions and negotiations with AbbVie to determine the best price that AbbVie might offer and requested that Mr. Saunders continue to keep the Allergan board of directors apprised of further discussions and developments with respect to a potential transaction with AbbVie.

Following the meeting of the Allergan board of directors, on June 11, 2019, Mr. Saunders called Mr. Gonzalez to discuss the potential transaction. Mr. Saunders noted that AbbVie would need to revise its offer again in order for the Allergan board of directors to support a transaction, and suggested that a contingent value right concept could bridge the gap. On June 12, 2019, Mr. Gonzalez called Mr. Saunders and rejected the contingent value right approach but relayed an updated final proposal to Mr. Saunders conditioned on AbbVie receiving assurances from credit rating agencies that AbbVie would maintain its investment grade rating. The final proposal was for an implied price of $188.00 per Allergan share, consisting of approximately two-thirds in cash and one-third in AbbVie shares and fixing the value of AbbVie stock for purposes of the exchange ratio at $78.17, the closing price of AbbVie stock on June 11. Mr. Gonzalez said that this was the highest price that AbbVie would be prepared to offer. Mr. Gonzalez noted that AbbVie intended to begin contacting the credit rating agencies on June 13, 2019 and that he would provide Mr. Saunders with an update following the regularly scheduled meeting of the AbbVie board of directors on June 19 – 20, 2019. Mr. Gonzalez also said that if Allergan agreed to proceed with a transaction, AbbVie would invite two of Allergan’s current directors (Mr. Saunders and a second director) to join an expanded AbbVie board of directors following the closing of the transaction.

On June 10 and June 12, 2019, representatives of Kirkland & Ellis LLP (“Kirkland & Ellis”), AbbVie’s legal advisor in connection with the transaction, discussed with representatives of Wachtell Lipton the process of negotiating and documenting a possible transaction, including requirements of the Irish Takeover Rules.

On June 13, 2019, Mr. Saunders and Mr. Gonzalez discussed the transaction, including timing and process of reaching agreement, as well as the implied premium to the then-current Allergan stock price.

Also on June 13, 2019, Kirkland & Ellis sent Wachtell Lipton initial drafts of the proposed transaction agreement, expenses reimbursement agreement and conditions to the consummation of the proposed transaction (referred to as the “Conditions Appendix”).

On June 16, 2019, the Allergan board of directors held a special telephonic meeting, attended by members of Allergan management and representatives of Wachtell Lipton. Mr. Saunders updated the Allergan board of directors on the status of the potential transaction and the discussions with the AbbVie management team. Following extensive discussion by the Allergan board of directors of the proposed terms, the Allergan board unanimously agreed that Allergan management and Allergan’s advisors should continue to progress the transaction, including negotiation of other terms, completion of due diligence and preparation for a public announcement.

On June 17, 2019, Mr. Saunders provided Mr. Gonzalez with an update on the Allergan board meeting and discussed the process of reaching agreement with respect to the transaction.

Also on June 17, 2019, Wachtell Lipton delivered to Kirkland & Ellis revised drafts of the transaction agreement, the expenses reimbursement agreement and the Conditions Appendix. Over the course of the subsequent days, the parties and their respective advisors, including their respective Irish co-counsel, negotiated and exchanged drafts of these and other transaction-related documents. The negotiations primarily focused on issues relating to the conditionality of the consummation of the transaction, covenants and closing conditions with respect to regulatory approvals and the implications if regulatory approvals could not be obtained, the definition of “material adverse effect,” the circumstances in which Allergan would be required to reimburse

 

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AbbVie for its expenses (subject to the one percent (1%) limit under Irish law as described elsewhere in this proxy statement), the treatment of equity awards and other employee compensation and benefits matters, provisions regarding Allergan’s ability to change its recommendation in favor of the transaction, provisions restricting the solicitation of alternative transaction proposals, the grounds for terminating the transaction agreement, and the interim operating covenants of Allergan pending the consummation of the transaction. Also during this process, the parties stayed in contact with the Irish Takeover Panel and raised issues with and received responses from the Irish Takeover Panel.

In addition to the negotiation of the transaction documentation, during the week of June 17, 2019, representatives of AbbVie and Allergan held numerous discussions regarding certain due diligence matters with respect to Allergan and AbbVie.

On June 20, 2019, Mr. Gonzalez and Mr. Saunders spoke again regarding the timing and process of reaching agreement with respect to the transaction. Mr. Gonzalez updated Mr. Saunders on the results of the meeting of the AbbVie board of directors, including that the AbbVie board of directors was supportive of the potential transaction. Mr. Gonzalez and Mr. Saunders concurred as to the importance of completing the process expeditiously, including because under the Irish Takeover Rules a leak could require premature public disclosure of the parties’ discussions, and agreed that the parties should work towards an announcement on the morning of June 25. Between June 20 and June 23, 2019, Mr. Gonzalez and Mr. Saunders had several conversations to resolve the final remaining open issues in the draft transaction agreement.

On June 23, 2019, the Allergan board of directors held a meeting in Shannon, Ireland, attended by members of Allergan management and representatives of Wachtell Lipton, Arthur Cox, and J.P. Morgan to consider the proposed terms and documentation for the proposed acquisition of Allergan by AbbVie. Mr. Saunders summarized for the Allergan board of directors the discussions with AbbVie and AbbVie’s advisors during the past two weeks and members of senior management of Allergan reviewed with the Allergan board of directors AbbVie’s due diligence process, Allergan’s reverse due diligence effort and the procedures undertaken by Allergan in connection with the proposed transaction. Representatives of Wachtell Lipton and Arthur Cox discussed with the Allergan board of directors an overview of the duties of directors and the Irish Takeover Rules in the context of the proposed transaction with AbbVie. In addition, a representative of Arthur Cox described to the Allergan board of directors the substance of the announcement required pursuant to Rule 2.5 of the Irish Takeover Rules in connection with the proposed transaction. Following this, representatives of J.P. Morgan reviewed for the Allergan board of directors their financial analysis of the proposed transaction. A discussion by the Allergan board of directors with respect to the proposed transaction, as well as alternatives to it ensued and members of Allergan management and representatives of J.P. Morgan, Wachtell Lipton and Arthur Cox responded to comments and questions from the Allergan board of directors. Following discussion, J.P. Morgan conveyed to the Allergan board of directors that J.P. Morgan expected to be able to deliver, on June 24, 2019, its opinion that the consideration to be paid to holders of Allergan ordinary shares was fair, from a financial point of view, to such Allergan shareholders, assuming that the definitive Transaction Agreement and the expenses reimbursement agreement would not differ in any material respects from the drafts thereof furnished to J.P. Morgan and that no material developments would occur prior to the delivery of the opinion that would have an adverse effect on J.P. Morgan’s financial analyses or opinion. J.P. Morgan’s opinion is more fully described under the caption “ The Transaction—Opinion of J.P. Morgan Securities LLC ” beginning on page 49 and the full text of the written opinion of J.P. Morgan, which sets forth the assumptions and limitations in such opinion, is attached as Annex D hereto. Representatives of Wachtell Lipton then summarized the key terms of the proposed transaction agreement, the expenses reimbursement agreement and the Conditions Appendix, which were summarized in writing in advance of the meeting, and also reviewed the regulatory processes the transaction entails and related terms of the proposed transaction documents. Following this, and based upon the presentations and discussions at this meeting, the Allergan board of directors unanimously determined that the draft transaction agreement and the transactions contemplated thereby, including the scheme, are advisable for, fair to and in the best interests of Allergan and the Allergan shareholders, and, subject to the final transaction agreements being in substantially the same form as reviewed by the Allergan board of directors (and not materially adverse to

 

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Allergan compared to the forms presented to the Allergan board of directors), as to be finally determined by Mr. Coughlin and Mr. Saunders, and subject to receipt of the J.P. Morgan opinion, approved the acquisition and determined that the terms of the scheme are fair and reasonable. Shortly thereafter, Mr. Saunders contacted Mr. Gonzalez to advise him of the action by the Allergan board of directors.

On June 24, 2019, the AbbVie board of directors held a telephonic meeting with Mr. Gonzalez, certain members of AbbVie’s management and representatives of AbbVie’s advisors to discuss the terms and documentation for the transaction and to further discuss the strategic rationale for, and financial information relating to, the transaction. AbbVie’s management also informed the AbbVie board of directors that the rating agencies had assessed the potential transaction and indicated that AbbVie would retain investment grade ratings, with assessments by Moody’s at Baa2 and S&P at BBB+. With the assistance of AbbVie’s management and the representatives of AbbVie’s advisors, the AbbVie board of directors reviewed the proposed final terms and conditions of the transaction agreements and the proposed transactions and the announcement required pursuant to Rule 2.5 of the Irish Takeover Rules in connection with the proposed transaction. Following discussion, the AbbVie board of directors unanimously approved and declared advisable the transaction agreements and the transactions contemplated thereby, including the scheme, and authorized the execution and delivery of the relevant transaction agreements by AbbVie, subject to the final transaction agreements being in substantially the same form as those reviewed by the AbbVie board of directors.

Also on June 24, 2019, Mr. Coughlin and Mr. Saunders, together with A. Robert D. Bailey, Executive Vice President and Chief Legal Officer and Corporate Secretary of Allergan, met telephonically with representatives of Wachtell Lipton, who provided an update on the transaction agreement negotiations since the prior day’s board of directors meeting. Mr. Coughlin and Mr. Saunders concluded that the final transaction agreements were in substantially the same form as those reviewed by the Allergan board of directors at the June 23, 2019 board meeting (and not materially adverse to Allergan compared to the forms presented to the Allergan board of directors). J.P. Morgan also formally delivered its opinion that as of June 24, 2019, and based upon and subject to the assumptions and limitations set forth in its opinion, the consideration proposed to be paid to the holders of Allergan ordinary shares in the proposed transaction was fair, from a financial point of view, to such Allergan shareholders.

On the morning of June 25, 2019, Allergan and AbbVie executed the Transaction Agreement and the expenses reimbursement agreement. Shortly thereafter, AbbVie and Allergan jointly issued the Rule 2.5 announcement pursuant to the Irish Takeover Rules.

Recommendation of the Allergan Board of Directors and Allergan’s Reasons for the Transaction

At its meeting on June 23, 2019, the members of the Allergan board of directors (other than Mr. Freyman, who had recused himself) unanimously determined that the Transaction Agreement and the transactions contemplated thereby, including the scheme, are advisable for, fair to and in the best interests of Allergan and the Allergan shareholders, and that the terms of the scheme are fair and reasonable. For purposes of the remainder of this section, each reference to the Allergan board of directors (or any meeting thereof) is intended to refer to that board or meeting without any participation by Mr. Freyman. The members of the Allergan board of directors unanimously recommend that the shareholders of Allergan vote in favor of the scheme at the special Court-ordered meeting and in favor of the scheme and other resolutions at the EGM.

In evaluating the Transaction Agreement and the proposed transaction, the Allergan board of directors consulted with management, as well as Allergan’s internal and outside legal counsel and its financial advisor, and considered a number of factors, weighing both the perceived benefits of the transaction and the potential risks of the transaction.

 

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The Allergan board of directors considered various factors that it believes support its determinations and recommendations, including the following (not necessarily in order of relative importance):

Aggregate Value and Composition of the Consideration

 

   

the scheme consideration has an implied value per Allergan ordinary share of $188.52, based on the closing price of AbbVie shares as of June 21, 2019, and represented (1) an approximately 44.1% premium to the closing price per Allergan share on June 21, 2019, and (2) an approximately 51% premium to the one-month volume-weighted average of Allergan’s share price as of June 21, 2019, which the Allergan board of directors regarded as an attractive valuation relative to other transactions and peer comparisons;

 

   

the benefits that Allergan was able to obtain as a result of negotiations with AbbVie, including an increase in the price per share from the time of initial discussions with AbbVie to the final implied value of $188.52 per Allergan ordinary share, and the Allergan board of directors’ belief that this was the highest price per share that AbbVie would be willing to pay;

 

   

the cash portion of the scheme consideration provides Allergan shareholders with immediate certainty of value while the equity component of the scheme consideration offers Allergan shareholders the opportunity to participate in the future earnings and growth of the combined company;

 

   

the fixed exchange ratio provides certainty to the Allergan shareholders as to their pro forma percentage ownership of approximately 17% of the combined company;

Synergies and Strategic Considerations

 

   

Allergan shareholders, as shareholders of the combined company, have the potential to benefit from the synergies expected to result from the transaction;

 

   

the belief of the Allergan board of directors that the combined company will have a comprehensive product portfolio, leadership positions across a number of therapeutic areas, and a diversified growth profile and broad geographic reach;

 

   

the Allergan board of directors’ familiarity with and understanding of Allergan’s business, results of operations, financial and market position, and its expectations concerning Allergan’s future prospects;

 

   

information and discussions with Allergan’s management, in consultation with J.P. Morgan, regarding AbbVie’s business, results of operations, financial and market position, and AbbVie management’s expectations concerning AbbVie’s business prospects, and historical and current trading prices of AbbVie shares;

 

   

information and discussions regarding the benefits of size and scale, the expected credit profile and the expected pro forma effect of the proposed transaction;

 

   

the Allergan board of directors’ ongoing evaluation of strategic alternatives for maximizing shareholder value over the long term, including senior management’s stand-alone plan or spinning off certain of Allergan’s businesses, and the potential risks (including the sub-scale R&D capacity of any spun-off entity), rewards and uncertainties associated with such alternatives, and the Allergan board’s belief that the proposed transaction with AbbVie was the most attractive option available to Allergan shareholders;

 

   

Allergan’s management’s view, shared with the Allergan board of directors, that industry trends will require increased R&D budgets and scale for long-term success and that, based on historic stand-alone R&D budgets of both companies, the new combined company is expected to have an annual R&D budget of approximately $6 billion, which will be critical to its success and which is an amount substantially in excess of that available to Allergan as a stand-alone company;

 

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Opinion of Financial Advisor

 

   

the opinion of J.P. Morgan for the benefit of the Allergan board of directors that, as of the date of the opinion and based upon and subject to the assumptions and limitations set forth therein, the consideration to be paid to holders of Allergan ordinary shares in the proposed transaction was fair, from a financial point of view, to such Allergan shareholders, together with the financial analyses presented by J.P. Morgan to the Allergan board of directors in connection with the delivery of the opinion, as further described under “ —Opinion of J.P. Morgan Securities LLC ” beginning on page 49;

Likelihood of Completion of the Transaction

 

   

the likelihood that the transaction will be consummated and anticipated timing of closing, based on, among other things:

 

   

the closing conditions to the scheme and acquisition, including the fact that the obligations of AbbVie are not subject to a financing condition;

 

   

that AbbVie has obtained committed debt financing for the transaction from reputable financing sources in accordance with the “funds certain” requirement of the Irish Takeover Rules; and

 

   

the commitment made by AbbVie to cooperate and use reasonable best efforts to obtain regulatory clearances, including under the HSR Act and the EC Merger Regulation, including to divest Allergan assets or commit to limitations on the businesses of Allergan to the extent provided in the Transaction Agreement, as discussed further under “ The Transaction—Regulatory Approvals Required ” beginning on page 68;

Favorable Terms of the Transaction Agreement and Expenses Reimbursement Agreement

 

   

the terms and conditions of the Transaction Agreement and the expenses reimbursement agreement and the course of negotiations of such agreements, including, among other things:

 

   

the ability of Allergan, under certain circumstances, to provide information to and to engage in discussions or negotiations with a third party that makes an unsolicited acquisition proposal, as further described under “ The Transaction Agreement—Covenants and Agreements ” beginning on page 81;

 

   

the ability of the Allergan board of directors, under certain circumstances, to change its recommendation to Allergan shareholders concerning the scheme or to recommend, adopt or approve an alternative acquisition proposal, as further described under “ The Transaction Agreement—Covenants and Agreements ” beginning on page 81;

 

   

the ability of the Allergan board of directors to terminate the Transaction Agreement under certain circumstances, including to enter into an agreement providing for a superior proposal, subject to certain conditions (including payment of an expense reimbursement to AbbVie and certain rights of AbbVie giving it the opportunity to match the superior proposal), as further described under “ The Transaction Agreement—Covenants and Agreements ” beginning on page 81;

 

   

the Allergan board of directors’ belief that the expenses reimbursement payment to be made to AbbVie upon termination of the Transaction Agreement under specified circumstances, which is capped at an amount equal to 1% of the aggregate value of the total scheme consideration, is reasonable, customary and not likely to significantly deter another party from making a superior acquisition proposal;

 

   

the obligation of AbbVie to pay Allergan a termination fee of approximately 2% of the implied transaction equity value of approximately $63 billion as of June 24, 2019, upon termination of the Transaction Agreement under specified circumstances; and

 

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the governance arrangements contained in the Transaction Agreement, which provide that, after completion of the scheme, the board of directors of AbbVie be expanded to include two individuals who are members of the Allergan board of directors immediately prior to the completion of the transaction, and the Allergan board of directors’ belief that these members could enhance the likelihood of obtaining the strategic benefits expected from the transaction and enhance the benefits that Allergan could bring to the combined company.

The Allergan board of directors also considered a variety of risks and other countervailing factors, including the following (not necessarily in order of relative importance):

Taxable Transaction

 

   

that any gains arising from the receipt of scheme consideration would be taxable to certain Allergan shareholders for U.S. federal income tax purposes;

Fluctuations in Share Price

 

   

that the fixed exchange ratio will not be adjusted to compensate for changes in the price of Allergan or AbbVie shares prior to the consummation of the transaction, and the terms of the Transaction Agreement do not include termination rights triggered by a decrease in the value of AbbVie relative to the value of Allergan (although the Allergan board of directors determined that the exchange ratio was appropriate and the risks acceptable in view of the relative intrinsic values and financial performance of Allergan and AbbVie);

Limitations on Allergan’s Business Pending Completion of the Transaction

 

   

the restrictions on the conduct of Allergan’s business during the pendency of the transaction, which may delay or prevent Allergan from undertaking business opportunities that may arise or may negatively affect Allergan’s ability to attract and retain key personnel;

 

   

the terms of the Transaction Agreement that restrict Allergan’s ability to solicit alternative business combination transactions and to provide confidential due diligence information to, or engage in discussions with, a third party interested in pursuing an alternative business combination transaction, as further discussed under “ The Transaction Agreement—Covenants and Agreements ” beginning on page 81;

Possible Disruption of Allergan’s Business

 

   

the potential for diversion of management attention and employee attrition and the possible effects of the announcement and pendency of the transaction on customers and business relationships;

Risks of Delays or Non-Completion

 

   

the amount of time it could take to complete the transaction, including the fact that completion of the transaction depends on factors outside of Allergan’s control, and that there can be no assurance that the conditions to the transaction will be satisfied even if the scheme is approved by Allergan shareholders;

 

   

the possibility of non-consummation of the transaction and the potential consequences of non-consummation, including the potential negative impacts on Allergan, its business and the trading price of its shares and the risk that the payment that AbbVie would be required to pay to Allergan under certain circumstances would be insufficient to compensate Allergan for the time, expenses and disruption incurred in connection with the contemplated transaction;

 

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Uncertainties Following Completion

 

   

the difficulty and costs inherent in integrating diverse, global businesses and the risk that the cost savings, synergies and other benefits expected to be obtained as a result of the transaction might not be fully or timely realized; and

Other Risks

 

   

the risks of the type and nature described under the sections entitled “ Risk Factors ” and “ Cautionary Statement Regarding Forward-Looking Statements ” beginning on pages 19 and 30 respectively.

In considering the recommendation of the Allergan board of directors, you should be aware that certain directors and officers of Allergan have interests in the proposed transaction that are in addition to, or different from, any interests they might have as shareholders. See “ —Interests of Certain Persons in the Transaction ” beginning on page 61.

The Allergan board of directors concluded that the uncertainties, risks and potentially negative factors relevant to the transaction were outweighed by the potential benefits that it expected Allergan and its shareholders would achieve as a result of the transaction.

This discussion of the information and factors considered by the Allergan board of directors includes the principal positive and negative factors considered by the Allergan board of directors, but is not intended to be exhaustive and may not include all of the factors considered by the Allergan board of directors. In view of the wide variety of factors considered in connection with its evaluation of the transaction, and the complexity of these matters, the Allergan board of directors did not find it useful and did not attempt to quantify or assign any relative or specific weights to the various factors that it considered in reaching its determination to approve the transaction and to make its recommendations to the Allergan shareholders. Rather, the Allergan board of directors viewed its decisions as being based on the totality of the information presented to it and the factors it considered. In addition, individual members of the Allergan board of directors may have given differing weights to different factors.

Opinion of J.P. Morgan Securities LLC

Pursuant to an engagement letter dated June 24, 2019, Allergan retained J.P. Morgan as its financial advisor in connection with the proposed transaction.

At the meeting of the Allergan board of directors on June 23, 2019, J.P. Morgan presented to the Allergan board of directors its financial analyses regarding the consideration to be paid to holders of Allergan ordinary shares in the proposed transaction and conveyed to the Allergan board of directors that J.P. Morgan expected to be able to deliver its opinion with respect to such consideration on June 24, 2019, assuming that the definitive Transaction Agreement and expenses reimbursement agreement would not differ in any material respects from the drafts thereof furnished to J.P. Morgan and that no material developments would occur prior to the delivery of the opinion that would have an adverse effect on J.P. Morgan’s financial analyses or opinion. On June 24, 2019, J.P. Morgan delivered its written opinion for the benefit of Allergan’s board of directors that, as of such date, the consideration to be paid to holders of Allergan ordinary shares in the proposed transaction was fair, from a financial point of view, to such shareholders. The full text of the written opinion of J.P. Morgan dated June 24, 2019, which sets forth the assumptions made, matters considered and limits on the review undertaken, is attached as Annex D to this proxy statement and is incorporated herein by reference. The summary of the opinion of J.P. Morgan set forth in this proxy statement is qualified in its entirety by reference to the full text of such opinion. Allergan’s shareholders are urged to read the opinion in its entirety. J.P. Morgan’s written opinion was addressed to the Allergan board of directors (in its capacity as such) in connection with and for the purposes of its evaluation of the proposed transaction, was directed only to the consideration to be paid in the proposed

 

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transaction and did not address any other aspect of the proposed transaction. J.P. Morgan expressed no opinion as to the fairness of any consideration to be paid in connection with the Transaction to the holders of any other class of securities, creditors or other constituencies of Allergan or as to the underlying decision by Allergan to engage in the proposed transaction. The issuance of J.P. Morgan’s opinion was approved by a fairness committee of J.P. Morgan. The opinion does not constitute a recommendation to any Allergan shareholder as to how such shareholder should vote with respect to the proposed transaction or any other matter.

In arriving at its opinion, J.P. Morgan, among other things:

 

   

reviewed the draft of the Transaction Agreement dated June 24, 2019, and the draft of the Expenses Reimbursement Agreement dated June 23, 2019;

 

   

reviewed certain publicly available business and financial information concerning Allergan and AbbVie and the industries in which they operate;

 

   

compared the proposed financial terms of the proposed transaction with the publicly available financial terms of certain transactions involving companies J.P. Morgan deemed relevant and the consideration paid for such companies;

 

   

compared the financial and operating performance of Allergan and AbbVie with publicly available information concerning certain other companies J.P. Morgan deemed relevant and reviewed the current and historical market prices of Allergan ordinary shares and AbbVie common stock and certain publicly traded securities of such other companies;

 

   

reviewed certain internal financial analyses and forecasts prepared by or at the direction of the management of Allergan relating to its business and certain Wall Street equity analyst forecasts for AbbVie supplied by the management of AbbVie as well as the estimated amount and timing of cost savings and related expenses and synergies expected to result from the proposed transaction as prepared by the management of Allergan (the “Synergies”); and

 

   

performed such other financial studies and analyses and considered such other information as J.P. Morgan deemed appropriate for the purposes of its opinion.

In addition, J.P. Morgan held discussions with certain members of the management of Allergan and AbbVie with respect to certain aspects of the proposed transaction, and the past and current business operations of Allergan and AbbVie, the financial condition and future prospects and operations of Allergan and AbbVie, the effects of the proposed transaction on the financial condition and future prospects of Allergan and AbbVie, and certain other matters J.P. Morgan believed necessary or appropriate to its inquiry.

Allergan furnished two sets of projections to J.P. Morgan for Allergan for the calendar years 2019 through 2024, which were prepared by the management of Allergan (for more information regarding Allergan’s projections, please refer to “ —Allergan Unaudited Prospective Financial Information ” beginning on page 57). Each management case set forth in the projections resulted in a different compound annual growth rate for Allergan’s revenues (the “3.5% Growth Case” and the “5.1% Growth Case,” further described in “ —Allergan Unaudited Prospective Financial Information ” beginning on page 57), and Allergan’s management directed J.P. Morgan to use both sets of projections in its analyses. The projections Allergan furnished to J.P. Morgan for AbbVie for the calendar years 2019 through 2024 were prepared by the management of Allergan based on Wall Street equity analyst forecasts for AbbVie as supplied by the management of AbbVie. These projections were based on numerous variables and assumptions that are inherently uncertain and may be beyond the control of management, including, without limitation, factors related to general economic and competitive conditions and prevailing interest rates. Accordingly, actual results could vary significantly from those set forth in such projections. For more information regarding the use of projections, please refer to “ —Allergan Unaudited Prospective Financial Information ” beginning on page 57.

 

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In giving its opinion, J.P. Morgan relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with J.P. Morgan by Allergan and AbbVie or otherwise reviewed by or for J.P. Morgan. J.P. Morgan did not independently verify any such information or its accuracy or completeness and, pursuant to its engagement letter with Allergan, did not assume any obligation to undertake any such independent verification. J.P. Morgan did not conduct and was not provided with any valuation or appraisal of any assets or liabilities, nor did J.P. Morgan evaluate the solvency of Allergan or AbbVie under any applicable laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to J.P. Morgan or derived therefrom, including the Synergies, J.P. Morgan assumed that they were reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management of Allergan as to the expected future results of operations and financial condition of Allergan and AbbVie to which such analyses or forecasts relate. J.P. Morgan expressed no view as to such analyses or forecasts (including the Synergies) or the assumptions on which they were based. J.P. Morgan also assumed that the transaction contemplated by the Transaction Agreement will have the tax consequences described in discussions with, and materials furnished to J.P. Morgan by, representatives of Allergan, and will be consummated as described in the Transaction Agreement. J.P. Morgan also assumed that the definitive Transaction Agreement and expenses reimbursement agreement would not differ in any material respects from the drafts thereof furnished to J.P. Morgan.

J.P. Morgan also assumed that there will be no adjustment made to the exchange ratio pursuant to the terms of the Transaction Agreement and that the representations and warranties made by Allergan and AbbVie in the Transaction Agreement and related agreements were and will be true and correct in all respects material to its analysis. J.P. Morgan is not a legal, regulatory or tax expert and has relied on the assessments made by advisors to Allergan with respect to such issues. J.P. Morgan further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the transaction contemplated by the Transaction Agreement will be obtained without any adverse effect on Allergan or AbbVie or on the contemplated benefits of the proposed transaction.

J.P. Morgan’s opinion was necessarily based on economic, market and other conditions as in effect on, and the information made available to J.P. Morgan as of, the date of such opinion. J.P. Morgan’s opinion noted that subsequent developments may affect J.P. Morgan’s opinion, and that J.P. Morgan does not have any obligation to update, revise or reaffirm such opinion. J.P. Morgan’s opinion is limited to the fairness, from a financial point of view, to holders of Allergan ordinary shares of the consideration to be paid to such shareholders, and J.P. Morgan has expressed no opinion as to the fairness of any consideration to the holders of any other class of securities, creditors or other constituencies of Allergan or as to the underlying decision by Allergan to engage in the transaction contemplated by the Transaction Agreement. Furthermore, J.P. Morgan expressed no opinion with respect to the amount or nature of any compensation to any officers, directors or employees of any party to the transaction contemplated by the Transaction Agreement, or any class of such persons relative to the consideration to be paid to holders of Allergan ordinary shares or with respect to the fairness of any such compensation. J.P. Morgan expressed no opinion as to the price at which Allergan’s ordinary shares or shares of AbbVie’s common stock will trade at any future time.

J.P. Morgan was not authorized to and did not solicit any expressions of interest from any other parties with respect to the sale of all or any part of Allergan or any other alternative transaction.

The terms of the Transaction Agreement were determined through arm’s-length negotiations between Allergan and AbbVie, and the decision to enter into the Transaction Agreement was solely that of Allergan’s board of directors. J.P. Morgan’s opinion and financial analyses were only one of the many factors considered by Allergan’s board of directors in its evaluation of the transaction contemplated by the Transaction Agreement and should not be viewed as determinative of the views of Allergan’s board of directors or management with respect to such proposed transaction or the consideration.

In accordance with customary investment banking practice, J.P. Morgan employed generally accepted valuation methodologies in rendering its opinion to Allergan’s board of directors on June 24, 2019. The

 

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following is a summary of the material financial analyses utilized by J.P. Morgan in connection with providing its opinion, as well as certain analyses utilized for reference purposes. Such summary does not purport to be a complete description of the analyses or data presented by J.P. Morgan. Some of the summaries of the financial analyses include information presented in tabular format. The tables are not intended to stand-alone, and in order to more fully understand the financial analyses used by J.P. Morgan, the tables must be read together with the full text of each summary. Considering the data set forth below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of J.P. Morgan’s analyses.

Historical Trading Range . J.P. Morgan presented to Allergan’s board of directors the trading range per share of Allergan’s ordinary shares for the 52-week period ending June 21, 2019, based on closing prices, which was $115.73 to $193.46, and compared that to (i) the closing price per share of Allergan’s ordinary shares of $130.81 on June 21, 2019, and (ii) the implied offer price per share of $188.52, consisting of the sum of $120.30 per share of cash consideration and $68.22 per share of implied stock consideration based on the closing price per share of AbbVie common stock of $78.78 on June 21, 2019.

J.P. Morgan also reviewed with Allergan’s board of directors the trading range per share of AbbVie common stock for the 52-week period ending June 21, 2019, based on closing prices, which was $75.70 to $98.84, and compared that to the closing price per share of AbbVie common stock of $78.78 on June 21, 2019.

J.P. Morgan noted that the historical trading range analysis is not a valuation methodology and that such analysis was presented merely for reference purposes only and not as a component of its fairness analysis.

Analyst Price Targets . J.P. Morgan presented to Allergan’s board of directors price targets of certain public equity research analysts for Allergan, which provided a reference range of $140.00 per share to $255.00 per share, with a price target per Wall Street consensus of $177.45 per share, and compared that to (i) the closing price per share of Allergan’s ordinary shares of $130.81 on June 21, 2019, and (ii) the implied offer price per share of $188.52.

J.P. Morgan also reviewed with Allergan’s board of directors price targets of certain public equity research analysts for AbbVie, which provided a reference range of $78.00 per share to $115.00 per share, with a price target per Wall Street consensus of $89.27 per share, and compared that to the closing price per share of AbbVie common stock of $78.78 on June 21, 2019.

J.P. Morgan noted that the analyst price targets analysis is not a valuation methodology and that such analysis was presented for reference purposes only and not as a component of its fairness analysis.

Public Trading Multiples . Using publicly available information, J.P. Morgan compared selected financial data of Allergan and AbbVie with similar data for selected publicly traded companies engaged in businesses that J.P. Morgan judged to be sufficiently analogous to those engaged in by Allergan and AbbVie.

For Allergan, the companies selected by J.P. Morgan were as follows:

 

   

Amgen Inc.

 

   

Biogen Inc.

 

   

Gilead Sciences, Inc.

 

   

AbbVie (based on estimated earnings per Wall Street consensus)

For AbbVie, the companies selected by J.P. Morgan were as follows:

 

   

Amgen Inc.

 

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Biogen Inc.

 

   

Gilead Sciences, Inc.

 

   

Allergan (based on estimated earnings per Wall Street consensus)

None of the selected companies reviewed is identical to Allergan or AbbVie, and certain of these companies may have characteristics that are materially different from those of Allergan and AbbVie. However, these companies were selected because they are publicly traded companies that, for purposes of J.P. Morgan’s analysis, may be considered similar to Allergan or AbbVie, as applicable, based on their operations and businesses. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies differently than they would affect Allergan or AbbVie, as applicable.

Using publicly available information, J.P. Morgan calculated for each selected company the ratio of its share price to estimated earnings per share, or “EPS,” for calendar year 2020, which is referred to throughout “ —Opinion of J.P. Morgan Securities LLC ” as “P/E 2020E.” The ratios were based on the selected companies’ closing share prices on June 21, 2019, and publicly available FactSet Consensus EPS estimates for calendar year 2020. The P/E 2020E ratios for the selected companies ranged from a low of 7.6x to a high of 12.7x.

Based on the results of this analysis and other factors which J.P. Morgan considered appropriate based on its experience and professional judgment, J.P. Morgan selected a P/E 2020E reference range of 7.5x to 12.5x for Allergan and AbbVie.

The range was then applied to Allergan’s estimated EPS for calendar year 2020 provided by the management of Allergan to J.P. Morgan, considering both management cases. Under the 5.1% Growth Case, the range yielded an implied equity value per share range, rounded to the nearest whole dollar, of $125.00 to $208.00. Under the 3.5% Growth Case, the range yielded an implied equity value per share range, rounded to the nearest whole dollar, of $123.00 to $206.00. J.P. Morgan compared the implied per share equity value ranges for Allergan to (i) the closing price per share of Allergan’s ordinary shares of $130.81 on June 21, 2019, and (ii) the implied offer price per share of $188.52.

The range for AbbVie was applied to AbbVie’s estimated EPS for calendar year 2020 provided by the management of Allergan to J.P. Morgan, yielding an implied equity value per share range, rounded to the nearest whole dollar, of $69.00 to $115.00. J.P. Morgan compared the implied per share equity value range for AbbVie to AbbVie’s closing price per share of $78.78 on June 21, 2019.

Selected Transaction Analysis . Using publicly available information, J.P. Morgan examined selected transactions involving businesses that J.P. Morgan judged to be sufficiently analogous to the business of Allergan. Specifically, J.P. Morgan reviewed the following transactions:

 

Target

  

Acquiror

  

Announcement Date

Celgene Corporation    Bristol-Myers Squibb Company    January 3, 2019
Shire plc    Takeda Pharmaceutical Co. Ltd.    May 8, 2018
Baxalta Incorporated    Shire plc    January 11, 2016
Allergan, Inc.    Actavis plc    November 17, 2014
Forest Laboratories, Inc.    Actavis plc    February 18, 2014
Genzyme Corporation    Sanofi-Aventis S.A.    February 16, 2011
Schering-Plough Corporation    Merck & Co., Inc.    March 8, 2009
Wyeth    Pfizer Inc.    January 26, 2009

None of the selected transactions reviewed was identical to the transaction contemplated by the Transaction Agreement. However, the transactions selected were chosen because they involved target companies that, for

 

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purposes of J.P. Morgan’s analysis, may be considered similar to Allergan based on their operations and businesses and because the transaction values may be considered similar to the transaction contemplated by the Transaction Agreement. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the transactions differently than they would affect the transaction contemplated by the Transaction Agreement.

Using publicly available information, J.P. Morgan calculated, for each of the selected transactions, the multiple of the target company’s enterprise value implied by the consideration paid in such transaction to the target company’s estimated EBITDA (based on FactSet data as of the date of the relevant transaction announcement) for (i) in the case of transactions announced prior to June 30, the calendar year in which the transaction was announced and (ii) in the case of transactions announced after June 30, the calendar year following the calendar year in which the transaction was announced, which is referred to in this proxy statement as CY1 EBITDA.

Based on the results of this analysis and other factors which J.P. Morgan considered appropriate based on its experience and professional judgment, J.P. Morgan selected a multiple reference range of 9.5x to 12.0x for CY1 EBITDA. This range was then applied to Allergan’s estimated EBITDA for calendar year 2019 provided by the management of Allergan to J.P. Morgan, yielding an implied equity value per share range of $150.00 to $205.00.

The range of implied equity values for Allergan was compared to (i) the closing price per share of Allergan’s ordinary shares of $130.81 on June 21, 2019, and (ii) the implied offer price per share of $188.52.

Discounted Cash Flow Analysis . J.P. Morgan conducted a discounted cash flow analysis for the purpose of determining the fully diluted equity value per share for each of Allergan and AbbVie. A discounted cash flow analysis is a method of evaluating an asset using estimates of the future unlevered free cash flows generated by the asset, and taking into consideration the time value of money with respect to those cash flows by calculating their “present value.” “Unlevered free cash flows” refers to a calculation of the future cash flows generated by an asset without including in such calculation any debt servicing costs. Specifically, for Allergan, unlevered free cash flow represents unlevered net operating profit after tax, adjusted for depreciation, changes in net working capital, capital expenditures and certain one-time cash flow items. For AbbVie, unlevered free cash flow represents unlevered net operating profit after tax, adjusted for depreciation, changes in net working capital and capital expenditures. “Present value” refers to the current value of the cash flows generated by the asset, and is obtained by discounting those cash flows back to the present using an appropriate discount rate and applying a discounting convention that assumes that all cash flows were generated at the midpoint of each period. “Terminal value” refers to the present value of all future cash flows generated by the asset for periods beyond the projections period.

J.P. Morgan utilized the estimated unlevered free cash flows for Allergan and AbbVie for calendar years 2020 through 2024, as reflected in the Allergan projections and the AbbVie projections, respectively. J.P. Morgan calculated a range of terminal values for Allergan and AbbVie at the end of this period by applying a perpetual growth rate ranging from 0.5% to 1.5% to the unlevered free cash flows of Allergan, and a perpetual growth rate ranging from negative 1.0% to 0.0% to the unlevered free cash flows for AbbVie, in each case during the terminal period of the projections and based on terminal growth rates and assumptions provided by Allergan.

The unlevered free cash flows and the range of terminal values were discounted to present values as of December 31, 2019, using a range of discount rates from 8.5% to 9.5% for both Allergan and AbbVie. The discount rates for Allergan and AbbVie were chosen by J.P. Morgan based upon an analysis of the weighted average cost of capital of the respective companies. The implied equity values were divided by the number of fully diluted shares outstanding at the applicable company, which analysis indicated an implied equity value per share range for Allergan, rounded to the nearest whole dollar, of $151.00 to $207.00 (implementing the 3.5% Growth Case) and $167.00 to $228.00 (implementing the 5.1% Growth Case), and an implied equity value per

 

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share range for AbbVie, rounded to the nearest whole dollar, of $82.00 to $102.00, in each case on a stand-alone basis (i.e., without the Synergies).

The range of implied equity values for Allergan was compared to (i) the closing price per share of Allergan’s ordinary shares of $130.81 on June 21, 2019, and (ii) the implied offer price per share of $188.52. The range of implied equity values for AbbVie was compared to AbbVie’s closing price per share of $78.78 on June 21, 2019.

Relative Implied Exchange Ratio Analysis . J.P. Morgan compared the results for Allergan to the results for AbbVie with respect to the public trading multiples and discounted cash flow analyses described above, after adjusting for $120.30 per share of cash consideration.

For each comparison, J.P. Morgan compared the highest equity value per share for Allergan to the lowest equity value per share for AbbVie to derive the highest exchange ratio implied by each pair of results. J.P. Morgan also compared the lowest equity value per share for Allergan to the highest equity value per share for AbbVie to derive the lowest exchange ratio implied by each pair of results. The implied exchange ratios resulting from this analysis were:

 

     Lowest Implied
Exchange Ratio
     Highest Implied
Exchange Ratio
 

52-week range (for reference only)

     (0.0581x      0.8118x  

Analyst price targets (for reference only)

     0.1713x        1.7269x  

Public Trading Multiples (implementing 5.1% Growth Case)

     0.0366x        1.2651x  

Public Trading Multiples (implementing 3.5% Growth Case)

     0.0268x        1.2380x  

Discounted Cash Flow (implementing 5.1% Growth Case)

     0.4575x        1.3124x  

Discounted Cash Flow (implementing 3.5% Growth Case)

     0.2974x        1.0584x  

The implied exchange ratios were compared to (i) the exchange ratio under the Transaction Agreement of 0.8660x, after adjusting for $120.30 per share of cash consideration, and (ii) the exchange ratio of 0.1334x, after adjusting for $120.30 per share of cash consideration, implied by the closing prices of Allergan’s ordinary shares and the shares of AbbVie common stock on June 21, 2019 of $130.81 and $78.78, respectively.

Value Creation Analysis . J.P. Morgan conducted an analysis of the theoretical value creation to the existing holders of Allergan ordinary shares that compared the estimated implied equity value per share of Allergan on a stand-alone basis based on the midpoint value determined in J.P. Morgan’s discounted cash flow analysis described above to the estimated implied equity value per share of Allergan’s former shareholders’ ownership in the combined company, pro forma for the transaction contemplated by the Transaction Agreement.

J.P. Morgan calculated the pro forma value to holders of Allergan ordinary shares by (1) calculating the sum of (a) the implied equity value of Allergan on a stand-alone basis using the midpoint value determined in J.P. Morgan’s discounted cash flow analysis described above, (b) the implied equity value of AbbVie on a stand-alone basis using the midpoint value determined in J.P. Morgan’s discounted cash flow analysis described above and (c) the estimated present value of the Synergies (net of estimated transaction expenses) as reflected in synergy estimates Allergan’s management provided to J.P. Morgan for use in connection with its analysis, (2) subtracting the aggregate amount of cash consideration to be paid to holders of Allergan ordinary shares based on $120.30 per share of cash consideration, (3) multiplying such result by the pro forma equity ownership of the combined company by the existing holders of Allergan ordinary shares, and (4) adding the aggregate amount of cash consideration to be paid to holders of Allergan ordinary shares based on $120.30 per share of cash consideration. This value creation analysis indicated that the transaction contemplated by the Transaction Agreement would create hypothetical incremental implied value of 7.3% (implementing the 5.1% Growth Case) or 16.9% (implementing the 3.5% Growth Case) for the holders of Allergan ordinary shares as compared to the stand-alone equity value of Allergan. There can be no assurance, however, that the Synergies, transaction-related expenses and other impacts referred to above will not be substantially greater or less than those estimated by Allergan’s management and described above.

 

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Miscellaneous . The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by J.P. Morgan. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. J.P. Morgan believes that the foregoing summary and its analyses must be considered as a whole and that selecting portions of the foregoing summary and these analyses, without considering all of its analyses as a whole, could create an incomplete view of the processes underlying the analyses and its opinion. As a result, the ranges of valuations resulting from any particular analysis or combination of analyses described above were merely utilized to create points of reference for analytical purposes and should not be taken to be the view of J.P. Morgan with respect to the actual value of Allergan or AbbVie. The order of analyses described does not represent the relative importance or weight given to those analyses by J.P. Morgan. In arriving at its opinion, J.P. Morgan did not attribute any particular weight to any analyses or factors considered by it and did not form an opinion as to whether any individual analysis or factor (positive or negative), considered in isolation, supported or failed to support its opinion. Rather, J.P. Morgan considered the totality of the factors and analyses performed in determining its opinion.

Analyses based upon forecasts of future results are inherently uncertain, as they are subject to numerous factors or events beyond the control of the parties and their advisors. Accordingly, forecasts and analyses used or made by J.P. Morgan are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by those analyses. Moreover, J.P. Morgan’s analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be acquired or sold. None of the selected companies reviewed as described in the above summary is identical to Allergan or AbbVie, and none of the selected transactions reviewed was identical to the transaction contemplated by the Transaction Agreement. However, the companies selected were chosen because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan’s analysis, may be considered similar to those of Allergan and AbbVie. The transactions selected were similarly chosen because their participants, size and other factors, for purposes of J.P. Morgan’s analysis, may be considered similar to the transaction contemplated by the Transaction Agreement. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies compared to Allergan and AbbVie and the transactions compared to the transaction contemplated by the Transaction Agreement.

As a part of its investment banking business, J.P. Morgan and its affiliates are continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for corporate and other purposes. J.P. Morgan was selected to advise Allergan with respect to the transaction contemplated by the Transaction Agreement and deliver an opinion to Allergan’s board of directors with respect thereto on the basis of, among other things, such experience and its qualifications and reputation in connection with such matters and its familiarity with Allergan, AbbVie and the industries in which they operate.

For services rendered in connection with the transaction (including the delivery of its opinion), Allergan agreed to pay J.P. Morgan a transaction fee of $123.0 million, of which $12.5 million became payable upon delivery of J.P. Morgan’s opinion (regardless of the conclusion reached therein), and the balance of which is payable at the effective time of the transaction contemplated by the Transaction Agreement. If Allergan or any of its subsidiaries or affiliates receives any payment from another person (including any payment as reimbursement of expenses) as a result of or in connection with the termination, abandonment or failure to occur of the transaction contemplated by the Transaction Agreement, Allergan will pay J.P. Morgan a break-up fee in an amount equal to $61.5 million (less any of the above fees already paid by Allergan). In addition, Allergan has agreed to reimburse J.P. Morgan for its reasonable costs and expenses incurred in connection with its services, including the reasonable fees and disbursements of counsel, and will indemnify J.P. Morgan against certain liabilities arising out of J.P. Morgan’s engagement.

 

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During the two years preceding the date of its opinion, J.P. Morgan and its affiliates have had commercial or investment banking relationships with Allergan, for which J.P. Morgan and such affiliates have received customary compensation. Such services during such period have included acting as joint lead bookrunner on an offering of debt securities of a subsidiary of Allergan in November 2018. In addition, J.P. Morgan’s commercial banking affiliate is an agent bank and a lender under outstanding credit facilities of Allergan, for which it receives customary compensation or other financial benefits. In addition, during the two years preceding the date of its opinion, J.P. Morgan and its affiliates have had commercial or investment banking relationships with AbbVie, for which J.P. Morgan and such affiliates have received customary compensation. Such services during such period have included acting as joint lead arranger and joint lead bookrunner on a revolving credit facility of AbbVie in August 2018, and acting as joint lead bookrunner on an offering of debt securities of AbbVie in September 2018. In addition, J.P. Morgan’s commercial banking affiliate is an agent bank and a lender under outstanding credit facilities of AbbVie, for which it receives customary compensation or other financial benefits. J.P. Morgan and its affiliates hold, on a proprietary basis, less than 1% of the outstanding common stock of each of Allergan and AbbVie. During the two-year period preceding delivery of its opinion, the aggregate fees recognized by J.P. Morgan from Allergan were approximately $1.3 million and from AbbVie were approximately $8.3 million. In the ordinary course of its businesses, J.P. Morgan and its affiliates may actively trade the debt and equity securities or financial instruments (including derivatives, bank loans or other obligations) of Allergan or AbbVie for its own account or for the accounts of customers and, accordingly, J.P. Morgan may at any time hold long or short positions in such securities or other financial instruments.

Allergan Unaudited Prospective Financial Information

Allergan’s management does not as a matter of course make public projections as to future performance, revenues, earnings or other results beyond the current fiscal year due to, among other reasons, the uncertainty, unpredictability and subjectivity of the underlying assumptions and estimates. Allergan is especially reluctant to disclose projections for extended periods due to the increasing uncertainty, unpredictability and subjectivity of such assumptions and estimates when applied to time periods further in the future. As result, Allergan does not endorse the unaudited prospective financial information as a reliable indication of future results. However, in connection with its evaluation of a potential transaction, Allergan’s management prepared certain unaudited prospective financial information for the partial fiscal year 2019 and fiscal years 2020 – 2024 with respect to each of Allergan (referred to as the “Allergan projections”) and AbbVie (referred to as the “AbbVie projections” and with the Allergan projections, the “Projections”). These Projections were made available to Allergan’s board of directors in connection with its consideration and evaluation of the transaction and to Allergan’s financial advisor in connection with its financial analyses and opinion.

As part of the due diligence investigation of AbbVie undertaken by Allergan and its advisors, Allergan requested from AbbVie nonpublic forecasts and projections as to AbbVie’s potential future performance prepared or adopted by AbbVie’s management. AbbVie informed Allergan that it does not as a matter of course make public forecasts or projections as to its potential future performance, and instead AbbVie directed Allergan to use certain Wall Street equity analyst forecasts for information on AbbVie’s potential future performance.

The inclusion of the Projections in this proxy statement should not be regarded as an indication that any of Allergan, AbbVie or their respective affiliates, advisors or representatives considered the Projections to be predictive of actual future events, and the Projections should not be relied upon as such. This summary of these internal financial forecasts is not being included in this proxy statement to influence your decision whether to vote in favor of any proposal. None of Allergan, AbbVie or their respective affiliates, advisors, officers, directors, partners or representatives can give you any assurance that actual results will not differ from these Projections, and none of them undertake any obligation to update or otherwise revise or reconcile these Projections to reflect circumstances existing after the date the Projections were generated or to reflect the occurrence of future events even in the event that any or all of the assumptions underlying the Projections are shown to be in error, in each case, except as may be required under applicable law. Allergan advised the recipients of the Projections that its internal financial forecasts upon which the Projections were based are

 

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subjective in many respects. While presented with numerical specificity, these Projections were based on numerous variables and assumptions known to Allergan at the time of preparation. These variables and assumptions are inherently uncertain and many are beyond the control of Allergan. Important factors that may affect actual results and cause these internal financial forecasts to not be achieved include, but are not limited to, risks and uncertainties relating to the businesses of Allergan and AbbVie (including their ability to achieve strategic goals, objectives and targets over applicable periods), industry performance, the regulatory and competitive environment, changes in technology, general business and economic conditions and other factors described or referenced under “ Risk Factors ” and “ Cautionary Statement Regarding Forward-Looking Statements ” beginning on pages 19 and 30 respectively. Various assumptions underlying the Projections may not prove to have been, or may no longer be, accurate. The Projections may not be realized, and actual results may be significantly higher or lower than projected in the Projections. The Projections summarized below do not give effect to the combination. The Projections also reflect assumptions as to certain business strategies or plans that are subject to change. The Projections do not take into account any circumstances or events occurring after the date they were prepared. The Projections cover multiple years, and such information by its nature becomes less predictive with each successive year. As a result, the inclusion of the Projections in this proxy statement should not be relied on as necessarily predictive of actual future events and actual results may differ materially (and will differ materially if the transaction and the other transaction contemplated by the Transaction Agreement are completed) from the Projections. For all of these reasons, the internal financial forecasts, and the assumptions upon which they are based, (i) are not guarantees of future results, (ii) are inherently speculative and (iii) are subject to a number of risks and uncertainties. As a result, actual results may differ materially from those contained in these internal financial forecasts. Accordingly, there can be no assurance that the Projections will be realized.

The Projections were prepared for internal use and to assist Allergan’s financial advisor with its financial analyses and opinion and the Allergan board of directors with its consideration and evaluation of the transaction, and although they were prepared on an accounting basis consistent with Allergan’s financial statements, they were not prepared with a view toward public disclosure or toward compliance with published guidelines of the Securities and Exchange Commission or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. The Projections included in this document have been prepared by, and are the responsibility of, Allergan. PricewaterhouseCoopers LLP (Allergan’s independent auditor, or “PricewaterhouseCoopers US”) or any other independent accountants has not audited, reviewed, examined, compiled nor applied agreed-upon procedures with respect to the Projections contained herein, and accordingly, PricewaterhouseCoopers US or any other independent accountant do not express an opinion or any other form of assurance with respect hereto. The PricewaterhouseCoopers US report incorporated by reference in this proxy statement relates to Allergan’s previously issued financial statements. It does not extend to the Projections and should not be read to do so.

For these reasons, as well as the basis and assumptions on which the Projections were compiled, the inclusion of specific portions of the Projections in this proxy statement should not be regarded as an indication that such Projections will be an accurate prediction of future events, and they should not be relied on as such. Except as required by applicable securities laws, none of Allergan, AbbVie or their respective affiliates, advisors, officers, directors, partners or representatives intend to update, or otherwise revise the Projections or the specific portions presented to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the assumptions are shown to be in error. Therefore, readers of this proxy statement are cautioned not to place undue, if any, reliance on the specific portions of the Projections set forth below. None of Allergan, AbbVie or their respective affiliates, advisors, officers, directors, partners or representatives intend to make publicly available any update or other revision to these Projections. In addition, none of Allergan, AbbVie or their respective affiliates, advisors, officers, directors, partners or representatives has made, makes or is authorized in the future to make any representation to any shareholder or other person regarding Allergan’s or AbbVie’s ultimate performance compared to the information contained in the Projections or that forecasts results will be achieved, and any statements to the contrary should be disregarded. Neither Allergan nor its financial advisor assumes any responsibility for the validity, reasonableness, accuracy or

 

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completeness of the Projections. Allergan has made no representation to AbbVie, and AbbVie has made no representation to Allergan, in the Transaction Agreement or otherwise, concerning the Projections.

Allergan’s management prepared two sets of projections on a product-by-product basis, which resulted in a 5.1% Growth Case and a 3.5% Growth Case. The two sets of projections were selected to illustrate the views of Allergan’s management regarding a plausible range of outcomes for Allergan’s business. The following is a summary of the Allergan projections (dollars in millions, except as otherwise indicated):

5.1% Growth Case

 

     2019E      2020E      2021E      2022E      2023E      2024E  

Revenue

   $ 15,384      $ 15,807      $ 16,803      $ 17,458      $ 18,574      $ 19,766  

EBITDA

   $ 7,334      $ 7,299      $ 7,835      $ 8,078      $ 8,694      $ 9,284  

EPS (dollars)

   $ 16.61      $ 16.60      $ 17.91        —          —          —    

3.5% Growth Case

 

     2019E      2020E      2021E      2022E      2023E      2024E  

Revenue

   $ 15,384      $ 15,698      $ 16,463      $ 16,758      $ 17,457      $ 18,271  

EBITDA

   $ 7,334      $ 7,243      $ 7,660      $ 7,718      $ 8,147      $ 8,616  

EPS (dollars)

   $ 16.61      $ 16.45      $ 17.45        —          —          —    

Allergan’s management also developed projections for AbbVie, based on the information described above. The following is a summary of the AbbVie projections (dollars in millions, except as otherwise indicated):

 

     2019E      2020E      2021E      2022E      2023E      2024E  

Revenue

   $ 32,888      $ 34,887      $ 37,436      $ 40,219      $ 39,444      $ 38,240  

EBITDA

   $ 16,083      $ 16,655      $ 17,707      $ 19,028      $ 17,986      $ 17,693  

EPS (dollars)

   $ 8.85      $ 9.19      $ 9.79        —          —          —    

In connection with its opinion to the Allergan board of directors, J.P. Morgan calculated, based on the Allergan projections provided by Allergan’s management to J.P. Morgan and pursuant to the adjustments for depreciation, changes in net working capital, capital expenditures and certain one-time cash flow items indicated by Allergan’s management, unlevered projected free cash flows for Allergan’s fiscal years 2020—2024. Projected free cash flows for fiscal years 2020—2024 represent the estimated unlevered net operating profit after tax for the relevant fiscal year, adjusted for depreciation, changes in net working capital, capital expenditures and certain one-time cash flow items, including pipeline acquisitions.

5.1% Growth Case

 

2020E

  

2021E

  

2022E

  

2023E

  

2024E

$3,638    $4,033    $4,141    $5,195    $5,318 (1)

 

(1)

Adjustments for change in net working capital and one-time cash flow items were not applied to the calculation of the terminal free cash flow.

3.5% Growth Case

 

2020E

  

2021E

  

2022E

  

2023E

  

2024E

$3,573    $3,869    $3,835    $4,720    $4,748 (1)

 

(1)

Adjustments for change in net working capital and one-time cash flow items were not applied to the calculation of the terminal free cash flow.

 

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In connection with its opinion to the Allergan board of directors, J.P. Morgan calculated, based on the AbbVie projections provided by Allergan’s management to J.P. Morgan and pursuant to the adjustments for depreciation, changes in net working capital, capital expenditures and certain one-time cash flow items indicated by Allergan’s management, unlevered projected free cash flows for AbbVie’s fiscal years 2020— 2024. Projected free cash flows for fiscal years 2020—2024 represent the estimated unlevered net operating profit after tax for the relevant fiscal year, adjusted for depreciation, changes in net working capital and capital expenditures.

 

2020E

  

2021E

  

2022E

  

2023E

  

2024E

$13,971    $14,448    $15,527    $14,592    $14,359 (1)

 

(1)

Adjustments for change in net working capital were not applied to the calculation of the terminal free cash flow.

See “ —Opinion of J.P. Morgan Securities LLC—Discounted Cash Flow Analysis ” beginning on page 54 for more information on the calculation of unlevered projected free cash flows.

Financing

AbbVie estimates that it will need approximately $41 billion in order to pay Allergan shareholders the cash consideration due to them under the Transaction Agreement and to pay related fees, premiums, costs, expenses and other transaction costs in connection with the acquisition. AbbVie anticipates that the funds needed to pay the foregoing amount will be derived from (i) cash on hand, (ii) borrowings under its existing and new credit facilities, including as described below, (iii) the proceeds from the sale of debt securities or (iv) any combination of the foregoing. In addition, either prior to or after the closing of the acquisition, AbbVie may conduct one or more exchange offers, offers to purchase and/or consent solicitations with respect to Allergan’s outstanding debt securities. The terms and timing of any such debt offerings, exchange offers, offers to purchase and/or consent solicitations has not been determined as of the date of this proxy statement. This proxy statement is not intended to and does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy or an invitation to purchase or subscribe for any debt securities of AbbVie or Allergan. No offer of debt securities will be made in the United States absent registration under the Securities Act, or pursuant to an exemption from, or in a transaction not subject to, such registration requirements.

Morgan Stanley & Co. LLC, acting through its affiliate Morgan Stanley & Co. International plc, financial advisor to AbbVie, is satisfied that sufficient resources are available to satisfy in full the cash consideration payable to Allergan shareholders under the terms of the transaction.

Bridge Credit Agreement

On June 25, 2019, AbbVie entered into a 364-day senior unsecured bridge credit agreement (the “Bridge Credit Agreement”) among AbbVie, certain lenders from time to time party thereto and Morgan Stanley Senior Funding, Inc. as administrative agent. Under the Bridge Credit Agreement, the lenders party thereto have committed to provide AbbVie with unsecured bridge financing in an aggregate principal amount of $38.0 billion. The commitments are intended to be available to finance, in part, the cash component of the scheme consideration, fees and expenses related thereto and the repayment of Allergan’s existing revolving credit facility. The commitments under the Bridge Credit Agreement were reduced by $6.0 billion upon the execution of the Term Loan Credit Agreement described below.

Term Loan Credit Agreement

On July 12, 2019, AbbVie entered into a senior unsecured term loan credit agreement (the “Term Loan Credit Agreement” and, together with the Bridge Credit Agreement, the “Credit Agreements,” and each

 

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individually, a “Credit Agreement”) among AbbVie, certain lenders from time to time party thereto and Morgan Stanley Senior Funding, Inc. as administrative agent. Under the Term Loan Credit Agreement, the lenders party thereto have committed to provide AbbVie with unsecured term loan financing consisting of (i) a $1.5 billion 364-day term loan tranche, (ii) a $2.5 billion three-year term loan tranche and (iii) a $2.0 billion five-year term loan tranche, in an aggregate principal amount of $6.0 billion. AbbVie intends to draw upon such commitments upon the consummation of the transaction to finance, in part, the cash component of the scheme consideration, fees and expenses related thereto and the repayment of Allergan’s existing revolving credit facility.

Summary of Terms of the Bridge Credit Agreement and the Term Loan Credit Agreement

The funding of the loans under each Credit Agreement is conditioned on, among other things, the consummation of the transaction and the absence of certain events of default described in each Credit Agreement. The commitments under each Credit Agreement automatically terminate on the earlier of (a) the date on which all of the certain funds purposes have been achieved without the making of any advances under the facility and (b) the time after a mandatory cancellation event occurs, including June 25, 2020 (subject to extension to September 25, 2020 in accordance with the end date set forth in the Transaction Agreement).

The borrower may voluntarily prepay the loans under each Credit Agreement at any time without premium or penalty. The Bridge Credit Agreement also requires mandatory prepayments with the net cash proceeds received by AbbVie in connection with certain asset sales, debt or equity issuances and recovery events, subject to customary exceptions. Each Credit Agreement also contains customary events of default, upon the occurrence of which, and for so long as such event of default is continuing, the amounts outstanding under such Credit Agreement will accrue interest at an increased rate and payments of such outstanding amounts could be accelerated by the lenders. In addition, the loan parties under each Credit Agreement will be subject to certain affirmative and negative covenants.

Interests of Certain Persons in the Transaction

Allergan

In considering the recommendation of the Allergan board of directors with respect to the Transaction Agreement, you should be aware that some of Allergan’s directors and executive officers have interests in the proposed transaction that are in addition to, or different from, any interests of Allergan’s shareholders generally. These interests are described in more detail below, and, with respect to the named executive officers of Allergan, are quantified in the table below. The Allergan board of directors was aware of these interests and considered them when it adopted the Transaction Agreement and approved the transaction.

Treatment of Allergan Stock Options and Allergan Share Awards

Allergan equity awards will be treated as set forth in the Transaction Agreement, such that (i) each Allergan stock option and each Allergan restricted stock unit award that is outstanding immediately prior to the effective time will be substituted by AbbVie with a corresponding award relating to shares of AbbVie common stock, with the number of shares of AbbVie common stock subject to such award and, if applicable, the exercise price applicable to such award, determined in accordance with the formulas set forth in the Transaction Agreement and (ii) each Allergan performance stock unit award that is outstanding as of immediately prior to the effective time will be substituted by AbbVie with an AbbVie restricted stock unit award that vests based on the holder’s continued service following the effective time and relates to a number of shares of AbbVie common stock determined in accordance with the formula set forth in the Transaction Agreement, in each case, as further described below.

At the effective time, each Allergan stock option, whether vested or unvested, that is outstanding and unexercised immediately prior to the effective time, will be substituted by AbbVie with an AbbVie stock option

 

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(a “substituted AbbVie stock option”). The number of shares of AbbVie common stock subject to such substituted AbbVie stock option will equal (i) the number of Allergan ordinary shares (rounded down to the nearest whole share) subject to the Allergan stock option immediately prior to the effective time multiplied by (ii) the “equity award conversion ratio” (as defined below). The exercise price applicable to such substituted AbbVie stock option will equal (i) the exercise price of such Allergan stock option immediately prior to the effective time divided by (ii) the equity award conversion ratio (rounded up to the nearest whole cent).

“Allergan share awards” consist of Allergan restricted stock unit awards and Allergan performance stock unit awards. At the effective time, each Allergan share award that is outstanding immediately prior to the effective time will be substituted by AbbVie with an AbbVie restricted stock unit award(a “substituted AbbVie share award”). The number of shares of AbbVie common stock subject to such substituted AbbVie share award will equal (i) the number of Allergan ordinary shares (rounded up to the nearest whole share) subject to the Allergan share award immediately prior to the effective time multiplied by (ii) the equity award conversion ratio. Each Allergan performance stock unit award will be substituted by AbbVie with an AbbVie restricted stock unit award that vests based on the holder’s continued service (and not subject to satisfaction of any performance-based vesting conditions), and for any performance stock unit awards that were subject to performance-based vesting conditions on June 25, 2019, any applicable performance metrics will be deemed satisfied at one hundred thirty percent (130%) of target as of the effective time.

Following the effective time, the substituted AbbVie stock options and substituted AbbVie share awards will have the same terms and conditions (including, for any performance stock unit awards, the same time-based vesting conditions, but excluding any performance-based vesting conditions, as described above) as applied to the corresponding Allergan stock option or Allergan share award immediately prior to the effective time, except for immaterial administrative or ministerial changes that are not adverse to any holder other than in any de minimis respect.

The “equity award conversion ratio” is equal to the sum (rounded to the nearest one thousandth) of (i) the exchange ratio specified in the Transaction Agreement (currently 0.8660) and (ii) the quotient obtained by dividing (A) the per share cash consideration payable under the Transaction Agreement ($120.30) by (B) the volume-weighted average price of a share of AbbVie common stock for the ten trading day period starting with the opening of trading on the eleventh trading day prior to the completion date to the closing of trading on the second to last trading day prior to the completion date.

Per the terms of the Allergan equity plans, if an executive officer of Allergan experiences a “qualified termination” (as defined in the applicable equity plan), which includes the executive officer’s termination without cause or resignation with good reason, during the two years following a change in control of Allergan, the executive officer’s substituted AbbVie stock options and substituted AbbVie share awards will vest in full. The Transaction Agreement provides that any unvested Allergan share awards held by a non-employee director of Allergan as of the effective time will vest in full upon such non-employee director ceasing to serve on the board of directors of AbbVie at or following the effective time. The Transaction Agreement also provides that following the effective time any post-vesting holding periods and/or transfer restriction periods applicable to Allergan performance stock unit awards held by Allergan’s executive officers will cease to apply.

For an estimate of the amounts that would be payable to each of Allergan’s named executive officers in respect of their unvested Allergan stock options and unvested Allergan share awards, see “— Quantification of Payments and Benefits to Allergan’s Named Executive Officers ” below. Based on the assumptions described under “— Quantification of Payments and Benefits to Allergan’s Named Executive Officers Assumptions ” below, the estimated aggregate amount that would be payable to (i) Allergan’s executive officers who are not named executive officers in respect of their unvested Allergan share awards is $4,955,778 and (ii) Allergan’s non-employee directors in respect of their unvested Allergan share awards is $3,415,507. None of Allergan’s non-employee directors or executive officers who are not named executive officers hold any unvested Allergan stock options.

 

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Chief Executive Officer Employment Agreement

Brenton L. Saunders entered into an employment agreement with Allergan at the time he commenced his role as Chief Executive Officer. Mr. Saunders’ employment agreement is scheduled to expire on December 31, 2019 and, prior to the effective time, Allergan intends to renew his employment agreement through December 31, 2020 on the same terms and conditions as provided in his existing employment agreement. Pursuant to the terms of his employment agreement, if Mr. Saunders’ employment is terminated by Allergan without cause or by him with good reason, and such termination occurs within 90 days prior to or 12 months following a change in control of Allergan, he will be entitled to receive: (i) a lump sum cash payment equal to three times the sum of (A) his then-current annual base salary and (B) his target annual bonus amount for the year in which the termination occurs, payable on the date that is 10 days following the 60th day following his termination of employment and (ii) continued group health benefits, with Mr. Saunders paying active employee premium rates and Allergan paying the balance of the company portion of premium rates, for him and his dependents for up to 36 months following termination.

In order to receive his severance benefits, Mr. Saunders is required to execute a release of claims against Allergan and comply with certain restrictive covenants included in his employment agreement, consisting of (i) limitations on soliciting or interfering with Allergan’s employees, customers, suppliers, licensees, or other business associates for a one-year period following his termination of employment; (ii) restrictions on competing with Allergan for a one-year period following his termination of employment; and (iii) non-disparagement and cooperation covenants effective for 24 months following his termination of employment. If Mr. Saunders incurs a termination of employment that does not entitle him to severance, Allergan may elect to pay him a lump sum cash payment, in an amount equal to the sum of his then-current base salary and target annual bonus amount for the year in which the termination occurs, in exchange for his agreement to comply with such non-competition restrictions.

The Transaction Agreement separately provides that, upon any termination of employment, Mr. Saunders will be provided with two years of secretarial support at the same level provided as of June 25, 2019.

For an estimate of the amounts that would be payable to Mr. Saunders pursuant to his employment agreement upon a severance-qualifying termination that occurs in connection with the transaction, see “— Quantification of Payments and Benefits to Allergan’s Named Executive Officers ” below.

Executive Severance Plan

On July 20, 2017, the compensation committee of the Allergan board of directors approved the Allergan 2017 Executive Severance Plan and, effective as of March 18, 2017, the compensation committee of the Allergan board of directors approved the Change of Control Severance Plan (each, a “Severance Plan”). Each Allergan executive officer other than Mr. Saunders whose severance entitlements are set forth in his employment agreement described above, participates in a Severance Plan. An executive officer whose employment is terminated during the 60 days prior to or two years following a change in control of Allergan, either by Allergan without cause or by the executive officer with good reason, is entitled to receive the following payments and benefits under the Severance Plan: (i) a lump sum payment equal to a multiple (2.5 for each named executive officer and one other executive officer and 2.0 for one other executive officer) of the sum of the executive officer’s (A) annual base salary as of his termination date or, if greater, as of the time of the change in control and (B) target annual incentive award for the fiscal year in which the termination occurs, payable on the first regularly scheduled payroll date following the date on which the executive officer’s release of claims becomes irrevocable, (ii) continued group health benefits (medical, dental and vision) for the executive officer and the executive officer’s eligible dependents for a period of months (up to 30 for each named executive officer and up to 24 for each other executive officer) with the executive officer paying active employee premium rates and Allergan paying the balance of the premium rates; and (iii) outplacement services for a period of months (up to 30 for each named executive officer and up to 24 for each other executive officer). Receipt of payments and

 

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benefits under the Severance Plan is conditioned upon the executive officer’s execution of an effective release of claims against Allergan (which will, for participants in the Executive Severance Plan, include non-competition, non-solicitation and other customary restrictive covenants).

For an estimate of the amounts that would be payable to Allergan’s named executive officers under the applicable Severance Plan if they experience a severance-qualifying termination in connection with the transaction, see “— Quantification of Payments and Benefits to Allergan’s Named Executive Officers ” below. Based on the assumptions described under “— Quantification of Payments and Benefits to Allergan’s Named Executive Officers Assumptions ” below, the estimated aggregate amount that would be payable to Allergan’s executive officers who are not named executive officers under the applicable Severance Plan is $4,915,000.

Annual Incentive Awards

Pursuant to the terms of Allergan’s 2019 Annual Incentive Program, if a change in control of Allergan occurs during the plan year ( i.e. , during calendar year 2019), participants will, as soon as practicable following the change in control, be paid a prorated annual incentive program award, subject to remaining employed with Allergan on the date of the change in control (unless terminated earlier due to retirement, death or disability). Performance will be determined based on the greater of deemed target performance and actual year-to-date performance through the date of the change in control, and the award will be prorated based on the portion of the performance period that lapsed between January 1, 2019 and the date of the change in control.

For an estimate of the amounts that would be payable to each of Allergan’s named executive officers under Allergan’s 2019 Annual Incentive Program in connection with the transaction, see “— Quantification of Payments and Benefits to Allergan’s Named Executive Officers ” below. Based on the assumptions described under “— Quantification of Payments and Benefits to Allergan’s Named Executive Officer Assumptions ” below, the estimated aggregate amount that would be payable under Allergan’s 2019 Annual Incentive Program in connection with the transaction to Allergan’s executive officers who are not named executive officers is $604,849.

Retention Bonuses

Prior to the effective time, Allergan may grant retention and/or transaction incentive bonuses to employees of Allergan (other than Mr. Saunders). The aggregate amount of such retention and/or transaction incentive bonuses shall not exceed $65 million, consisting of $50 million pursuant to the terms of the Transaction Agreement, plus an additional $15 million that was expressly agreed to by Allergan and AbbVie after their entry into the Transaction Agreement. Such retention and/or transaction incentive bonuses shall be paid no earlier than the first anniversary of the effective time (or upon the recipient’s earlier termination of employment without cause or resignation with good reason (other than due to a material diminution or reduction in authority, title, duties or responsibilities that occurs in connection with the transaction, including Allergan becoming a subsidiary of AbbVie, and the associated organizational changes) at or following the effective time, to the extent specified in the applicable award agreement). Although each of Allergan’s executive officers, other than Mr. Saunders, is eligible to receive a retention and/or transaction incentive bonus, as of the date of this filing, no executive officer of Allergan has received a retention or transaction incentive bonus in connection with the transaction.

Golden Parachute Excise Taxes

None of Allergan’s executive officers is entitled to receive a tax gross-up under an employment agreement or the applicable Severance Plan. Rather, any payment or benefit received by the executive officer that would constitute a “parachute payment” within the meaning of Section 280G of the Internal Revenue Code will be reduced to the extent necessary so that no portion will be subject to any excise tax but only if, by reason of such reduction, the net after-tax benefit received by the executive officer exceeds the net after-tax benefit (after taking into account the excise tax, interest and penalties and any tax imposed by any comparable provision of state law

 

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and any applicable federal, state, and local income and employment taxes) that would be received by the participant if no reduction was made.

Indemnification; Directors’ and Officers’ Insurance

Pursuant to the terms of the Transaction Agreement, certain directors and officers of Allergan will be entitled to certain ongoing indemnification and coverage under directors’ and officers’ liability and fiduciary liability insurance policies following the transaction. Such indemnification and insurance coverage is further described in the section entitled “— The Transaction Agreement Directors’ and Officers’ Indemnification and Insurance ” beginning on page 90.

Quantification of Payments and Benefits to Allergan’s Named Executive Officers

The table below sets forth the information required by Item 402(t) of Regulation S-K regarding the amount of payments and benefits that each of Allergan’s named executive officers may receive in connection with the transaction. Although Maria Teresa Hilado was one of Allergan’s named executive officers for its most recently completed fiscal year, she terminated employment prior to the date on which the Transaction Agreement was executed and is not entitled to any payments or benefits in connection with the transaction. Accordingly, she is excluded from the table below.

Assumptions

Unless otherwise noted, the estimates set forth in the table below assume the following:

 

   

the relevant per share price of Allergan ordinary shares is $165.48, which equals the average closing price of a share of Allergan ordinary shares over the first five business days following the announcement of the transaction;

 

   

the effective time of the transaction occurs on August 12, 2019, which is the latest practicable date prior to the date of this filing;

 

   

each named executive officer experiences a termination without cause or resigns with good reason immediately following the completion of the transaction; and

 

   

each named executive officer’s base salary and annual target bonus amounts remain unchanged from those in place on August 12, 2019.

The amounts set forth in the table below are based on multiple assumptions that may or may not actually occur or be accurate on the relevant date, including assumptions described in footnotes to the table. The amounts below do not reflect certain compensation actions that may occur before the effective time, such as the grant of annual equity awards in the ordinary course of business. The actual amounts payable to Allergan’s named executive officers, if any, will depend on whether the named executive officer incurs a qualifying termination, the date of termination of the named executive officer’s employment (if applicable), the closing date of the transaction, the value of AbbVie common stock on the termination date, the manner of termination, and the terms of the plans or agreements in effect at such time.

Change in Control Compensation

 

Name

   Cash
($) (1)
     Equity
($) (2)
     Pension/
NQDC
($) (3)
     Perquisites/
Benefits
($) (4)
     Tax
Reimbursement
($) (5)
     Total
($)
 

Brenton L. Saunders

     14,882,877        23,625,381        —          154,037        —          38,662,295  

Matthew W. Walsh

     5,049,863        8,887,319        —          91,942        —          14,029,124  

William Meury

     5,797,055        7,093,432        —          90,004        —          12,980,491  

C. David Nicholson

     5,797,055        6,925,304        —          67,587        —          12,789,946  

A. Robert D. Bailey

     4,769,315        4,826,886        —          90,206        —          9,686,407  

 

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(1)

The cash payments to Mr. Saunders consist of (a) a pro rata annual bonus for the 2019 fiscal year (assuming target performance), payable as soon as practicable following the effective time and (b) a lump sum cash payment equal to three times the sum of (i) his then-current annual base salary and (ii) his target annual bonus amount for the 2019 fiscal year, payable within 10 days following the date that is 60 days after his termination date.

The cash payments to each other named executive officer consist of (a) a pro rata annual bonus for the 2019 fiscal year (assuming target performance), payable as soon as practicable following the effective time and (b) a lump sum payment equal to 2.5 multiplied by the sum of the named executive officer’s (i) annual base salary as of his termination date or, if greater, as of the time of the change in control, and (ii) target annual incentive award for the fiscal year in which the termination occurs, payable on the first regularly scheduled payroll date following the date on which the named executive officer’s release of claims becomes irrevocable.

The pro rata bonuses are “single-trigger” benefits payable solely due to the occurrence of the effective time; and the lump sum cash severance payments are “double-trigger” benefits that would be payable upon a termination without cause or resignation with good reason that occurs, in each case, during the two years (or, for Mr. Saunders, one year) following the effective time.

 

Name

   Pro Rata
Bonus
($)
     Lump Sum
Severance
Payment
($)
 

Brenton L. Saunders

     1,832,877        13,050,000  

Matthew W. Walsh

     549,863        4,500,000  

William Meury

     672,055        5,125,000  

C. David Nicholson

     672,055        5,125,000  

A. Robert D. Bailey

     519,315        4,250,000  

For more information, please see “— Interests of Certain Persons in the Transaction Allergan Chief Executive Officer Employment Agreement ,” “— Executive Severance Plan ” and “— Annual Incentive Awards ” above.

 

(2)

The amounts in this column represent the value of unvested Allergan stock options and unvested Allergan share awards, which are “double-trigger” benefits and would only accelerate upon the named executive officer’s termination of employment without cause or resignation with good reason that occurs, in each case, during the two years following the effective time. None of the named executive officers holds unvested Allergan stock options.

 

Name

   Allergan
Restricted
Stock Units
($)
     Allergan
Performance
Stock Units
($)
 

Brenton L. Saunders

     2,777,913        20,847,468  

Matthew W. Walsh

     2,859,329        6,027,990  

William Meury

     877,209        6,216,223  

C. David Nicholson

     877,209        6,048,095  

A. Robert D. Bailey

     584,806        4,242,080  

For more information, please see “— Interests of Certain Persons in the Transaction—Allergan—Treatment of Allergan Stock Options and Allergan Share Awards ” above.

 

(3)

None of Allergan’s named executive officers is eligible to receive any non-qualified deferred compensation plan enhancements upon the transaction or a termination of employment following the transaction. Any vested non-qualified deferred compensation account balances under Allergan’s non-qualified deferred compensation plans will be paid in accordance with the named executive officer’s pre-existing elections,

 

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  which may include payment upon a separation from service. If the non-qualified deferred compensation plan is terminated by Allergan in connection with the transaction, any such amounts will be paid within 12 months following the termination of the plan. None of Allergan’s named executive officers participates in Allergan’s defined benefit pension plans.

 

(4)

The amounts set forth in the table above include the estimated value of continued health benefits (medical, dental and vision) for Mr. Saunders for 36 months and for each other named executive officer for 30 months. In addition, for each named executive officer other than Mr. Saunders, the amounts set forth in the table above include the estimated value of 30 months of outplacement benefits, and for Mr. Saunders only, sets forth the estimated value of two years of secretarial support. Benefits continuation and outplacement benefits are “double-trigger” benefits payable only upon a termination without cause or resignation with good reason that occurs, in each case, during the two years (or, for Mr. Saunders, one year) following the effective time.

 

Name

   Benefits
Continuation
($)
     Outplacement
Benefits/
Other
($)
 

Brenton L. Saunders

     54,037        100,000  

Matthew W. Walsh

     41,942        50,000  

William Meury

     40,004        50,000  

C. David Nicholson

     17,587        50,000  

A. Robert D. Bailey

     40,206        50,000  

 

(5)

None of Allergan’s named executive officers is entitled to receive a golden parachute excise tax gross-up.

In addition, Thomas C. Freyman is not participating in the recommendation of the Allergan board of directors as Mr. Freyman is regarded under Rule 3 of the Irish Takeover Rules as having a conflict of interest due to Mr. Freyman’s shareholding in AbbVie.

AbbVie’s Intentions Regarding AbbVie and Allergan

AbbVie’s directors believe that the Acquisition will create a more diversified pharmaceutical company, positioned for success in current and future health care markets. Following the Acquisition, AbbVie will have additional growth platforms and an expanded revenue base, providing immediate scale and enhanced profitability, while also enhancing Allergan’s product portfolio with AbbVie’s commercial strength, expertise and international infrastructure. The combined company will consist of several attractive franchises with leadership positions across immunology, hematologic oncology, medical aesthetics, neuroscience, women’s health, eye care and virology.

AbbVie has commenced, and will continue following the closing, a comprehensive evaluation of the combined company’s operations and will identify the best way to integrate the organizations in order to further improve its ability to serve its patients, as well as achieve cost synergies. Employees from both Allergan and AbbVie are involved in the evaluation and formation of an integration plan. AbbVie and Allergan will continue to operate separately and independently until closing.

The evaluation and formulation of these plans will be diligently conducted in phases. Until these evaluations and formation of plans have been completed, neither AbbVie nor Allergan is in a position to comment on prospective potential impacts upon employment, specific locations or any redeployment of fixed assets. Based upon experience in integrating acquisitions, it is AbbVie’s and Allergan’s expectation that there will be a reduction in headcount for the combined group stemming from the elimination of duplicative activities, functions, facilities, or the redeployment of fixed assets.

Upon completion of the transaction, AbbVie will continue to be incorporated in Delaware as AbbVie Inc. and have its principal executive offices in North Chicago, Illinois. AbbVie will continue to be led by Richard A.

 

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Gonzalez as chairman and chief executive officer. Two members of Allergan’s Board, including chairman and chief executive officer, Brent Saunders, will join AbbVie’s Board following closing of the transaction.

AbbVie has not entered into, and has not had discussions with, Allergan or its management on proposals for AbbVie to enter into any form of incentivization arrangements with members of Allergan’s management. As part of its broader strategic review of Allergan, AbbVie may put in place appropriate arrangements for management and/or certain employees of Allergan. For details of certain retention arrangements that Allergan has put in place in connection with the Acquisition, please see “ Interests of Certain Persons in the Transaction—Allergan—Retention Bonuses ” beginning on page 163.

Regulatory Approvals Required

United States Antitrust

Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder (referred to as the “HSR Act”), the acquisition cannot be consummated until, among other things, notifications have been submitted to the U.S. Federal Trade Commission (referred to as the “FTC”) and the Antitrust Division of the U.S. Department of Justice (referred to as the “Antitrust Division”), and specified waiting period requirements have been observed. On July 25, 2019, each of AbbVie and Allergan filed a Notification and Report Form (referred to as “HSR Notification Form”) pursuant to the HSR Act with the FTC and the Antitrust Division, initiating a 30-day waiting period. The 30-day waiting period under the HSR Act is scheduled to expire at 11:59 p.m. (Eastern Time in the U.S.) on August 26, 2019; however, if AbbVie withdraws and refiles its HSR Notification Form prior to the expiration of the initial 30-day waiting period, a new 30-day waiting period is initiated. During the 30-day waiting period, the FTC or the Antitrust Division can choose to shorten the waiting period by granting early termination or may extend the waiting period by issuing a Request for Additional Information and Documentary Materials (referred to as “Second Request”) to each party. If Second Requests are issued, the waiting period would be extended until 11:59 p.m. (Eastern Time in the U.S.) on the 30th day after certification of substantial compliance with such Second Request by both parties (however, the parties could agree with the FTC or DOJ not to consummate the acquisition for some period of time after the waiting period expires). As a practical matter, if such Second Requests were issued, it could take a significant period of time to achieve substantial compliance with such Second Requests.

Other Regulatory Clearances

AbbVie and Allergan derive revenues in other jurisdictions where merger control filings or clearances are required, including clearance by the European Commission and in Brazil, Canada, China, Israel, Mexico, Japan, South Africa, South Korea, Turkey, and the United Kingdom (only in the event of any exit by the United Kingdom from, or suspension or termination of its membership in, the European Union such that a United Kingdom governmental entity has jurisdiction under any antitrust law to review the transaction contemplated by the Transaction Agreement). The transaction cannot be consummated until after the applicable waiting periods have expired or the relevant approvals have been obtained under the antitrust and competition laws of the countries listed above where merger control filings or approvals are required.

Irish Court Approvals

The scheme of arrangement requires the approval of the Irish High Court, which involves an application by Allergan to the Irish High Court to sanction the scheme. The Irish High Court must also confirm the reduction of capital of Allergan that would be effected by resolution #2 described above.

 

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Payment of Consideration

Settlement of the scheme consideration to which any Allergan shareholder is entitled will be paid to Allergan shareholders of record within 14 days of completion of the transaction. For further information regarding the settlement of consideration, see “ Part 2—Explanatory Statement—Settlement, Listing and Dealings ” beginning on page 168.

 

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NO DISSENTERS’ RIGHTS

Under Irish law, holders of Allergan ordinary shares do not have appraisal or dissenters’ rights with respect to the acquisition or any of the other transactions described in this proxy statement.

 

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MATERIAL TAX CONSEQUENCES OF THE PROPOSED TRANSACTION

Irish Tax Considerations

This is a summary of the principal Irish tax considerations for certain beneficial owners of Allergan ordinary shares who receive shares of AbbVie common stock and cash under the scheme based on Irish taxation laws and the practices of the Irish Revenue Commissioners currently in force in Ireland and may be subject to change. It deals with Allergan shareholders who beneficially own their Allergan ordinary shares as an investment. Particular rules not discussed below may apply to certain classes of taxpayers holding Allergan ordinary shares, such as dealers in securities, collective investment schemes, insurance companies, trusts etc. The summary does not constitute tax or legal advice and the comments below are of a general nature only. Holders of Allergan ordinary shares should consult their professional advisers on the tax implications of the scheme under the laws of their country of residence, citizenship or domicile.

Taxation of Chargeable Gains

The current rate of tax on chargeable gains in Ireland is thirty-three percent (33%).

Non-resident shareholders

Allergan shareholders that are neither resident nor ordinarily resident in Ireland for Irish tax purposes and do not hold their Allergan ordinary shares in connection with a trade carried on by such shareholders through an Irish branch or agency should not be liable for Irish tax on chargeable gains (referred to as the “Irish CGT”) in relation to the scheme.

Irish resident shareholders

Allergan shareholders that are resident or ordinarily resident in Ireland for Irish tax purposes or that hold their Allergan ordinary shares in connection with a trade carried on by such persons through an Irish branch or agency (each referred to as an “Irish Holder”) will, subject to the availability of any exemptions and reliefs, generally be within the charge to Irish CGT in relation to the scheme.

For the purposes of Irish CGT:

 

   

the receipt of shares of AbbVie common stock pursuant to the scheme should be treated as a reorganisation of Allergan’s share capital;

 

   

the effect should be that an Irish Holder’s holding of shares of AbbVie common stock received pursuant to the scheme should be treated as the same asset, acquired at the same time and for the same consideration, as the holding of Allergan ordinary shares held by that Irish Holder immediately prior to the scheme;

 

   

in respect of cash received by an Irish Holder pursuant to the scheme (including cash received in lieu of fractional shares), an Irish Holder should be treated as having made a part disposal of their holding for such cash amount. This may, subject to the Irish Holder’s individual circumstances and any available exemption or relief, give rise to a chargeable gain (or allowable loss) for the purposes of Irish CGT;

 

   

each Irish Holder’s aggregate CGT base cost in their holding of Allergan ordinary shares prior to the issue of shares of AbbVie common stock should fall to be apportioned by apportioning the aggregate CGT base cost between that part of the holding disposed of in consideration for the cash entitlement and that part of the holding which remains. The proportion of base cost attributable to the part of the holding disposed of should be equal to X/(X+Y) where X is the cash entitlement in respect of the Irish Holder’s Allergan ordinary shares and Y is the market value of the Irish Holder’s shares of AbbVie common stock on the relevant date of disposal (converted into euro, where necessary, using the exchange rate prevailing on that day).

 

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Computation And Treatment Of Gains Or Losses In Respect Of The Cash Entitlement

 

   

An Irish Holder should be treated as having made a disposal of part of his/her holding of Allergan ordinary shares for consideration of an amount equal to the cash received in respect of their cancellation. This may, subject to the Irish Holder’s individual circumstances and any available exemption or relief, give rise to a chargeable gain (or allowable loss) for the purposes of Irish CGT.

 

   

Any gain or loss will be calculated by reference to the difference between the amount of cash received and the element of the Irish Holder’s CGT base cost in their holding of Allergan ordinary shares that is apportioned to the part of the holding disposed of as described above.

 

   

For the purposes of such calculations, euro amounts must generally be used. Where an Irish Holder has given or received a non-euro amount in acquiring or being treated as disposing of assets, such euro amounts must be determined by reference to the relevant rate of exchange at the time of the relevant CGT event. An Irish Holder receiving a dollar amount on the cancellation of the Allergan ordinary shares will therefore be required to convert that sum into euro by reference to the relevant rate of exchange as at the effective date of the scheme.

 

   

An Irish Holder will be subject to tax on chargeable gains at thirty-three percent (33%) on their net chargeable gains (after taking account of allowable loses) arising in the year of assessment. In the case of individuals, an annual exemption from CGT applies (EUR (€) 1270 for 2019).

Stamp Duty

No Irish stamp duty should be payable by Allergan shareholders on the issue of the shares of AbbVie common stock or the cancellation of the Allergan ordinary shares.

Any holder of Allergan ordinary shares who has any doubt about his or her own taxation position or who is subject to taxation in any jurisdiction other than Ireland is strongly recommended to consult his or her independent professional adviser immediately.

Material U.S. Federal Income Tax Considerations

The following is a general discussion of the material U.S. federal income tax consequences of the scheme to U.S. holders (as defined below) that receive shares of AbbVie common stock and cash in exchange for their Allergan ordinary shares pursuant to the scheme. This discussion is limited to U.S. holders who hold their Allergan ordinary shares as “capital assets” within the meaning of Section 1221 of the U.S. Internal Revenue Code of 1986, as amended (referred to as the “Code”) (generally, property held for investment). This discussion is based on current provisions of the Code, the Treasury Regulations promulgated thereunder, judicial interpretations thereof and administrative rulings and published positions of the Internal Revenue Service (which is referred to as the “IRS”), each as in effect as of the date hereof, and all of which are subject to change or differing interpretations, possibly with retroactive effect. Any such change or interpretation could affect the accuracy of the statements and conclusions set forth herein.

This discussion is for general information only and does not purport to address all aspects of U.S. federal income taxation that may be relevant to particular holders of Allergan ordinary shares in light of their particular facts and circumstances and does not apply to holders of Allergan ordinary shares that are subject to special rules under the U.S. federal income tax laws (including, for example, banks or other financial institutions, insurance companies, regulated investment companies, real estate investment trusts, mutual funds, dealers in securities or currencies, traders in securities that elect to apply a mark-to-market method of accounting, tax-exempt entities, entities or arrangements treated as partnerships for U.S. federal income tax purposes or other flow-through entities (and investors therein), subchapter S corporations, retirement plans, individual retirement accounts or other tax-deferred accounts, holders liable for the alternative minimum tax, U.S. holders having a “functional currency” other than the U.S. dollar, holders who hold Allergan ordinary shares as part of a straddle, constructive sale, conversion transaction or other integrated or risk reduction transaction, holders required to accelerate the recognition of any item of gross income as a result of such income being recognized on an applicable financial

 

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statement, holders that actually or constructively hold five percent (5%) or more of the Allergan ordinary shares and holders who acquired their Allergan ordinary shares through the exercise of an employee stock option or otherwise as compensation or through a retirement plan). This discussion does not address any considerations under U.S. federal tax laws other than those pertaining to the income tax, nor does it address any considerations under any state, local or non-U.S. tax laws or under the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010 or with respect to the Foreign Account Tax Compliance Act of 2010 (including the Treasury Regulations promulgated thereunder and any intergovernmental agreements entered in connection therewith and any laws, regulations or practices adopted in connection with any such agreement). Furthermore, this discussion does not address any tax consequences to holders who are not U.S. holders.

For purposes of this discussion, the term “U.S. holder” means a beneficial owner of Allergan ordinary shares that, for U.S. federal income tax purposes, is:

 

   

an individual who is a citizen or resident of the United States;

 

   

a corporation (or any other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;

 

   

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

 

   

a trust (a) if a court within the United States is able to exercise primary supervision over the trust’s administration and one or more U.S. persons have the authority to control all substantial decisions of the trust or (b) that has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person for U.S. federal income tax purposes.

If a partnership (including any entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds Allergan ordinary shares, the tax treatment of a person treated as a partner in such partnership generally will depend on the status of the partner, the activities of the partnership and certain determinations made at the partnership level. Such partnerships and any person that for U.S. federal income tax purposes is treated as a partner in a partnership holding Allergan ordinary shares should consult their tax advisors regarding the tax consequences of the scheme to them.

All holders of Allergan ordinary shares should consult their own tax advisors to determine the particular tax consequences to them of the scheme, including the applicability and effect of any U.S. federal, state, local, non-U.S. and other tax laws. Holders of Allergan ordinary shares that are not U.S. holders should consult their own tax advisors regarding the possibility that, in the event the applicable withholding agent is unable to determine whether any cash consideration paid in the scheme should be treated as a dividend for applicable U.S. federal income tax purposes, such withholding agent may withhold U.S. federal withholding tax at a rate of thirty percent (30%) (or such lower rate as may be specified by an applicable income tax treaty) on the entire amount of cash consideration payable to such non-U.S. holders in the scheme, and such non-U.S. holders should consult their own tax advisors as to the possible desirability and timing of selling any AbbVie common stock or Allergan ordinary shares that they own.

Subject to the discussion below under “ —Passive Foreign Investment Company Considerations ” beginning on page 74, the receipt of cash and shares of AbbVie common stock in exchange for Allergan ordinary shares pursuant to the scheme will be a taxable transaction for U.S. federal income tax purposes. A U.S. holder generally will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between (i) the sum of the cash and the fair market value of the AbbVie common stock received pursuant to the scheme and (ii) such U.S. holder’s adjusted tax basis in the Allergan ordinary shares surrendered in exchange therefor. Such gain or loss generally will be capital gain or loss, and will be long-term capital gain or loss if the U.S. holder’s holding period for such shares exceeds one year as of the effective date of the scheme. Long-term capital gains for certain noncorporate U.S. holders, including individuals, are generally eligible for a preferential rate of federal income taxation. The deductibility of capital losses is subject to limitations. If a U.S. holder acquired different

 

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blocks of Allergan ordinary shares at different times or at different prices, such U.S. holder must determine its tax basis, holding period, and gain or loss separately with respect to each block of Allergan ordinary shares.

A U.S. holder’s tax basis in the AbbVie common stock received in the transaction will equal its fair market value as of the effective time. A U.S. holder’s holding period for the AbbVie common stock received in the scheme will begin on the day following the effective time.

Notwithstanding the foregoing, in certain circumstances, the receipt of cash pursuant to the scheme by a U.S. holder that actually or constructively owns AbbVie common stock, may be subject to Section 304 of the Code. If Section 304 of the Code applies, then instead of recognizing gain or loss as described above in respect of any cash consideration received in the scheme, such U.S. holder may recognize dividend income up to the amount of such cash consideration depending on the application of the tests set forth in Section 302 of the Code in light of such U.S. holder’s particular circumstances, including the application of constructive ownership rules. Holders of Allergan ordinary shares that also actually or constructively own AbbVie common stock should consult their tax advisors regarding the application of these rules to their particular circumstances and any actions that may be taken to mitigate the potential application of such rules.

Passive Foreign Investment Company Considerations

A non-U.S. corporation, such as Allergan, will be classified as a “passive foreign investment company” (referred to as a “PFIC”) for any taxable year, if after the application of certain “look-through” rules, (a) at least seventy-five percent (75%) of its gross income is “passive income” as that term is defined in the relevant provisions of the Code (e.g., dividends, interest, royalties, or gains on the disposition of certain minority interests), or (b) at least fifty percent (50%) of the average value of its assets consists of assets that produce, or are held for the production of, “passive income.” Allergan is not expected to be classified as a PFIC for U.S. federal income tax purposes, but this conclusion is a factual determination made annually and, thus, is subject to change.

If Allergan were classified as a PFIC for any taxable year during which a U.S. holder held Allergan ordinary shares, such classification could result in adverse tax consequences to such U.S. holder, and different U.S. federal income tax consequences from those described above may apply to the receipt of cash and AbbVie common stock by such U.S. holder in exchange for Allergan ordinary shares. These consequences may include having gains realized on the receipt of cash and AbbVie common stock in exchange for Allergan ordinary shares treated as ordinary income rather than capital gain and being subject to punitive interest charges on such gains. U.S. holders should consult their own tax advisors regarding the potential application of the PFIC rules to their disposition of Allergan ordinary shares in connection with the scheme.

Information Reporting and Backup Withholding

Payments of cash to a U.S. holder pursuant to the scheme may be subject to information reporting and backup withholding (currently at a rate of twenty-four percent (24%)), unless such U.S. holder provides proof of an applicable exemption or furnishes its taxpayer identification number and otherwise complies with all applicable requirements of the backup withholding rules. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or credit against a U.S. holder’s U.S. federal income tax liability, if any, provided that certain required information is timely furnished to the IRS.

The preceding discussion is intended only as a general summary of material U.S. federal income tax consequences of the scheme. It is not a complete analysis or discussion of all potential tax effects that may be important to a particular holder. All holders of Allergan ordinary shares should consult their own tax advisors as to the specific tax consequences of the transaction to them, including tax reporting requirements, and the applicability and effect of any federal, state, local and non-U.S. tax laws.

 

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DELISTING AND DEREGISTRATION OF ALLERGAN ORDINARY SHARES

Following the consummation of the transaction, Allergan ordinary shares will be delisted from the New York Stock Exchange and deregistered under the Exchange Act.

 

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INFORMATION ABOUT THE COMPANIES

AbbVie

AbbVie is a global, research-driven biopharmaceutical company committed to developing innovative advanced therapies for some of the world’s most complex and critical conditions. AbbVie’s mission is to use its expertise, dedicated people and unique approach to innovation to markedly improve treatments across four primary therapeutic areas: immunology, oncology, virology and neuroscience. In more than 75 countries, AbbVie employees are working every day to advance health solutions for people around the world.

AbbVie was incorporated in Delaware on April 10, 2012. On January 1, 2013, AbbVie became an independent, publicly-traded company as a result of the distribution by Abbott of one hundred percent (100%) of the outstanding common stock of AbbVie to Abbott’s shareholders. AbbVie is listed on the New York Stock Exchange and the Chicago Stock Exchange under the symbol “ABBV.” AbbVie’s principal executive offices are located at 1 North Waukegan Road, North Chicago, Illinois 60064-6400, its telephone number is 847-932-7900 and its website is www.abbvie.com. Information on AbbVie’s website is not incorporated by reference into or otherwise part of this proxy statement.

Allergan

Allergan is a global pharmaceutical leader. Allergan is focused on developing, manufacturing and commercializing branded pharmaceutical, device, biologic, surgical and regenerative medicine products for patients around the world. Allergan markets a portfolio of leading brands and best-in-class products primarily focused on four key therapeutic areas including medical aesthetics, eye care, central nervous system and gastroenterology. Allergan has operations in more than 100 countries. Allergan’s ordinary shares are currently traded on the New York Stock Exchange under the symbol “AGN.” Allergan’s principal executive offices are located at Clonshaugh Business and Technology Park, Coolock, Dublin, D17 E400, Ireland, its telephone number is (862) 261-7000 and its website is www.allergan.com. Information on Allergan’s website is not incorporated by reference into or otherwise part of this proxy statement.

Acquirer Sub

Acquirer Sub, a wholly owned subsidiary of AbbVie, is a limited liability company organized in Delaware solely for the purpose of effecting the acquisition. Acquirer Sub was formed on June 20, 2019. To date, Acquirer Sub has not conducted any activities other than those incidental to its formation and the execution of the Transaction Agreement and the other documents relating to the acquisition.

Acquirer Sub’s principal executive offices are located at 1 North Waukegan Road, North Chicago, Illinois 60064-6400, and its telephone number is 847-932-7900.

 

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THE TRANSACTION AGREEMENT

The following is a summary of certain material terms of the Transaction Agreement and the conditions appendix and is qualified in its entirety by reference to (i) the complete text of the Transaction Agreement, which is incorporated into this proxy statement by reference and attached as Annex A to this proxy statement and (ii) the complete text of the conditions appendix, which is incorporated into this proxy statement by reference and attached as Annex B to this proxy statement. This summary is not intended to provide you with any other factual information about Allergan or AbbVie. We urge you to read carefully this entire proxy statement, including the Annexes and the documents incorporated by reference. You should also review the section entitled “Where You Can Find More Information” beginning on page 149.

Structure of the Transaction

Pursuant to the acquisition, Acquirer Sub will acquire the entire issued and to be issued ordinary share capital of Allergan by way of a scheme of arrangement. Upon the completion of the acquisition, Allergan will be a wholly owned subsidiary of AbbVie.

Closing of the Transaction

The closing of the acquisition will take place at 9:00 a.m. New York City time, on a date to be selected by AbbVie in consultation with Allergan as promptly as reasonably practicable following, but not later than the third business day after the satisfaction or waiver, where applicable, of the conditions set forth in the conditions appendix other than those conditions that by their nature are to be satisfied at the closing, but subject to the satisfaction or waiver of such conditions, or at such other date and/or time as may be mutually agreed to by AbbVie and Allergan in writing. For a description of the conditions to the closing of the acquisition, see the section entitled “— Conditions to the Completion of the Acquisition ” beginning on page 92 of this proxy statement.

Scheme Consideration to Allergan Shareholders

At the effective time, Allergan shareholders will be entitled to receive (i) $120.30 in cash and (ii) 0.8660 of a newly issued share of AbbVie common stock, in exchange for each Allergan ordinary share held by such Allergan shareholders. Allergan shareholders will not receive any fractional shares of AbbVie common stock as scheme consideration. Instead, fractional shares will be aggregated and sold in the market by the exchange agent, with the net proceeds of any such sale distributed in cash pro rata to the Allergan shareholders whose fractional entitlements have been sold.

If the payment of the scheme consideration would result in the issuance of AbbVie common stock in excess of 19.99% of the aggregate shares of AbbVie common stock outstanding immediately prior to the completion (as reasonably determined by AbbVie) (referred to as the “share cap”), the exchange ratio of 0.8660 will be reduced by the smallest number (rounded to the nearest 0.0001) that causes the total number of shares of AbbVie common stock issuable in the acquisition to not exceed the share cap, and the cash consideration described above would then be increased by an amount in cash equal to that number multiplied by the ten (10) day volume-weighted average price of AbbVie common stock starting with the opening of trading on the eleventh trading day prior to the completion date to the closing of trading on the second to last trading day prior to the completion date.

Treatment of Allergan Options and Allergan Share Awards

Allergan equity awards will be treated as set forth in the Transaction Agreement, such that (i) each Allergan option and each Allergan restricted stock unit award that is outstanding immediately prior to the effective time will be substituted by AbbVie with a corresponding award relating to shares of AbbVie common stock, with the

 

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number of shares of AbbVie common stock subject to such award and, if applicable, the exercise price applicable to such award, determined in accordance with the formulas set forth in the Transaction Agreement and (ii) each Allergan performance stock unit award that is outstanding as of immediately prior to the effective time will be substituted by AbbVie with an AbbVie restricted stock unit award that vests based on the holder’s continued service following the effective time and relates to a number of shares of AbbVie common stock determined in accordance with the formula set forth in the Transaction Agreement, in each case, as further described below.

At the effective time, each Allergan stock option, whether vested or unvested, that is outstanding and unexercised immediately prior to the effective time, will be substituted by AbbVie with an AbbVie stock option (a “substituted AbbVie stock option”). The number of shares of AbbVie common stock subject to such substituted AbbVie stock option will equal (i) the number of Allergan ordinary shares (rounded down to the nearest whole share) subject to the Allergan stock option immediately prior to the effective time multiplied by (ii) the “equity award conversion ratio” (as defined below). The exercise price applicable to such substituted AbbVie stock option will equal (i) the exercise price of such Allergan stock option immediately prior to the effective time divided by (ii) the equity award conversion ratio (rounded up to the nearest whole cent).

“Allergan share awards” consist of Allergan restricted stock unit awards and Allergan performance stock unit awards. At the effective time, each Allergan share award that is outstanding immediately prior to the effective time will be substituted by AbbVie with an AbbVie restricted stock unit award (a “substituted AbbVie share award”). The number of shares of AbbVie common stock subject to such substituted AbbVie share award will equal (i) the number of Allergan ordinary shares (rounded up to the nearest whole share) subject to the Allergan share award immediately prior to the effective time multiplied by (ii) the equity award conversion ratio. Each Allergan performance stock unit award will be substituted by AbbVie with an AbbVie restricted stock unit award that vests based on the holder’s continued service (and not subject to satisfaction of any performance-based vesting conditions), and for any performance stock unit awards that were subject to performance-based vesting conditions on June 25, 2019, any applicable performance metrics will be deemed satisfied at one hundred thirty percent (130%) of target as of the effective time.

Following the effective time, the substituted AbbVie stock options and substituted AbbVie share awards will have the same terms and conditions (including, for any performance stock unit awards, the same time-based vesting conditions, but excluding any performance-based vesting conditions, as described above) as applied to the corresponding Allergan stock option or Allergan share award immediately prior to the effective time, except for immaterial administrative or ministerial changes that are not adverse to any holder other than in any de minimis respect.

The “equity award conversion ratio” is equal to the sum (rounded to the nearest one thousandth) of (i) the exchange ratio specified in the Transaction Agreement (currently 0.8660) and (ii) the quotient obtained by dividing (A) the per share cash consideration payable under the Transaction Agreement ($120.30) by (B) the volume-weighted average price of a share of AbbVie common stock for the ten (10) trading day period starting with the opening of trading on the eleventh (11th) trading day prior to the completion date to the closing of trading on the second to last trading day prior to the completion date.

Exchange of Allergan Ordinary Shares

An exchange agent appointed by AbbVie and reasonably acceptable to Allergan will act as exchange agent. At or immediately following the effective time, AbbVie, will deposit, or cause to be deposited, with the exchange agent (i) certificates or, at AbbVie’s option, evidence of shares in book-entry form representing the aggregate AbbVie shares issuable pursuant to the acquisition, (ii) cash in an amount equal to the aggregate amount of the cash consideration payable to Allergan’s shareholders and (iii) cash representing the proceeds of the sale of any fractional shares of AbbVie otherwise due to Allergan shareholders. As promptly as reasonably practicable after the effective time, and in any event within five (5) business days after the effective time, AbbVie will cause the exchange agent to mail to each holder of record of a certificate or certificates which immediately prior to the

 

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effective time represented Allergan shares and each holder of record of non-certificated Allergan shares represented by book-entry shares that is entitled to receive the scheme consideration a letter of transmittal and instructions for use in receiving payment of the scheme consideration. See “ —Scheme Consideration to Allergan Shareholders ” beginning on page 77.

Each holder of record of such Allergan shares will be entitled to receive promptly following the effective time: (a) the amount of cash payable in respect of the $120.30 that such holder has the right to receive plus the amount of any cash payable in lieu of any fractional AbbVie shares that such holder has the right to receive and (b) that number of AbbVie shares into which such holder’s Allergan shares were converted. No interest will be paid or accrue for the benefit of holders of the Allergan shares on the scheme consideration payable in respect of the Allergan shares. See “— Scheme Consideration to Allergan Shareholders ” beginning on page 77.

Representations and Warranties

Allergan, AbbVie and Acquirer Sub made customary representations and warranties set forth in the Transaction Agreement on behalf of themselves and their respective subsidiaries that are subject, in some cases, to specified exceptions and qualifications contained in the Transaction Agreement or in certain disclosure schedules to the Transaction Agreement. The representations and warranties made by Allergan, AbbVie and Acquirer Sub are also subject to and qualified by certain information included in filings Allergan and AbbVie have made with the SEC.

The Transaction Agreement contains substantially reciprocal representations and warranties of AbbVie and Acquirer Sub, on one hand, and Allergan, on the other hand, regarding, among other things:

 

   

corporate organization, existence and good standing and requisite corporate power and authority to carry on business;

 

   

capital structure;

 

   

corporate authority to enter into the Transaction Agreement and the expenses reimbursement agreement and the enforceability thereof;

 

   

SEC filings and financial statements contained in those filings;

 

   

the maintenance of internal disclosure controls and internal control over financial reporting;

 

   

the absence of undisclosed liabilities or obligations that have had or would reasonably be expected to have, individually or in the aggregate, a material adverse effect;

 

   

compliance with applicable laws and government regulations;

 

   

the absence of certain changes since March 31, 2019, that have had or would reasonably be expected to have, individually or in the aggregate, a material adverse effect; and

 

   

the absence of certain material litigation, claims and actions.

In addition, Allergan has further made representations and warranties regarding, among other things:

 

   

the due incorporation or organization, valid existence and good standing of its subsidiaries as well as their qualification to do business and good standing in each jurisdiction where such qualification is necessary;

 

   

compliance with environmental laws;

 

   

compliance with applicable laws related to employee benefits and the Employee Retirement Income Security Act of 1974, as amended;

 

   

the reliability and accuracy of information supplied for this proxy statement and any other documents filed or furnished to the Irish High Court, the SEC, or pursuant to the Act or the Takeover Rules, in each case in connection with the acquisition;

 

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certain regulatory matters relating to, among other relevant authorities, the U.S. Food, Drug and Cosmetic Act of 1938, as amended, and other U.S. and foreign healthcare laws;

 

   

certain tax matters;

 

   

the absence of collective bargaining agreements and other employment and labor matters;

 

   

ownership of or right to intellectual property, and absence of infringement;

 

   

title and rights to, and condition of, real property;

 

   

the requisite vote of shareholders necessary to consummate the acquisition;

 

   

the existence of and compliance with certain material contracts;

 

   

the existence and maintenance of insurance;

 

   

the receipt of a fairness opinion;

 

   

the absence of undisclosed brokers’ fees or finders’ fees relating to the acquisition;

 

   

compliance with the Foreign Corrupt Practices Act of 1977, as amended, and certain anti-corruption laws in other jurisdictions;

 

   

the inapplicability of anti-takeover statutes, regulations and provisions of Allergan’s organizational document to the parties to the Transaction Agreement and to the acquisition;

 

   

related party transactions; and

 

   

Allergan’s ownership of shares of AbbVie common stock.

In addition, AbbVie and Acquirer Sub have further made representations and warranties, among other things availability of financing to AbbVie.

Under the Transaction Agreement, the parties agreed that except for the representations and warranties contained in the Transaction Agreement, neither Allergan nor AbbVie makes any other representation or warranty.

Many of the representations and warranties made by each of Allergan, AbbVie and Acquirer Sub are qualified by a material adverse effect standard. For the purpose of the Transaction Agreement, a “material adverse effect” with respect to each of Allergan and AbbVie means:

 

   

an event, change, effect, development or occurrence that, individually or together with any other event, change, effect, development or occurrence, (a) would prevent, materially delay or materially impair the ability of the applicable party to consummate the acquisition prior to June 25, 2020 (or September 25, 2020, if extended under the terms of the Transaction Agreement) or (b) has had or would reasonably be expected to have a material adverse effect on the condition (financial or otherwise), properties, assets, liabilities, business, operations or results of operations of the applicable party and its subsidiaries, taken as a whole, however, solely for the purposes of clause (b), excluding any event, change, effect, development or occurrence to the extent resulting from or arising out of:

 

   

any changes in general United States or global economic conditions;

 

   

any change in conditions generally affecting the industries in which the applicable party operates;

 

   

any decline, in and of itself, in the market price or trading volume of the applicable party’s stock price (however, the facts, events, developments or occurrences giving rise to or contributing to such decline that are not otherwise excluded from the definition of material adverse effect may be taken into account in determining whether there has been, or would reasonably be expected to be a material adverse effect);

 

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any change in political conditions or in securities, credit, financial, debt or other capital markets in the United States and abroad;

 

   

any failure, in and of itself, by the applicable party and its subsidiaries to meet any internal or published projections, forecasts, estimates or predictions, revenues, earnings or other financial or operating metrics for any period (however, the facts, events, developments or occurrences giving rise to or contributing to such failure that are not otherwise excluded from the definition of material adverse effect may be taken into account in determining whether there has been, or would reasonably be expected to be a material adverse effect);

 

   

the execution and delivery of the Transaction Agreement, the public announcement of the Transaction Agreement or the consummation of the transaction contemplated thereby (except with respect to any representation or warranty that is intended to expressly address the consequences of the execution, delivery or performance of the Transaction Agreement or the consummation of the transaction contemplated by the Transaction Agreement (including the acquisition) or the closing condition requiring Allergan’s representations and warranties to be true at closing);

 

   

any adoption of, or change in applicable law of or by any governmental entity;

 

   

any change or prospective change in GAAP;

 

   

any change in geopolitical conditions or the escalation thereof since the date of the Transaction Agreement;

 

   

any epidemic or other natural disasters or acts of God;

 

   

certain matters set forth in the applicable party’s disclosure schedules to the Transaction Agreement; or

 

   

any action taken by the applicable party or its subsidiaries that is expressly required to be taken by such party or its subsidiaries pursuant to the Transaction Agreement or any action expressly requiring the other party’s consent pursuant to the Transaction Agreement which is not taken as a result of the failure of the other party to consent to such action.

However, the exceptions laid out in the second, third, fifth, eighth, ninth, tenth or eleventh bullets may be considered to the extent that any such event, change, effect, development or occurrence has a disproportionate adverse effect on the applicable party, taken as a whole, relative to the adverse effect such event, change, effect, development or occurrence has on other companies operating in the industries in which the applicable party operates.

THE DESCRIPTION OF THE TRANSACTION AGREEMENT IN THIS PROXY STATEMENT HAS BEEN INCLUDED TO PROVIDE YOU WITH INFORMATION REGARDING ITS TERMS. THE TRANSACTION AGREEMENT CONTAINS REPRESENTATIONS AND WARRANTIES MADE BY AND TO THE PARTIES AS OF SPECIFIC DATES. THE STATEMENTS EMBODIED IN THOSE REPRESENTATIONS AND WARRANTIES WERE MADE FOR PURPOSES OF THE CONTRACT BETWEEN THE PARTIES AND ARE SUBJECT TO QUALIFICATIONS AND LIMITATIONS AGREED BY THE PARTIES IN CONNECTION WITH NEGOTIATING THE TERMS OF THE TRANSACTION AGREEMENT AND IN SOME CASES WERE QUALIFIED BY CONFIDENTIAL DISCLOSURES MADE BY THE PARTIES, WHICH DISCLOSURES ARE NOT REFLECTED IN THE TRANSACTION AGREEMENT. IN ADDITION, CERTAIN REPRESENTATIONS AND WARRANTIES WERE MADE AS OF A SPECIFIED DATE OR MAY HAVE BEEN USED FOR THE PURPOSE OF ALLOCATING RISK BETWEEN THE PARTIES RATHER THAN ESTABLISHING MATTERS AS FACTS.

Covenants and Agreements

Allergan and AbbVie agreed to certain covenants and agreements set forth in the Transaction Agreement on behalf of themselves and their respective subsidiaries that are subject, in some cases, to specified exceptions and qualifications contained in the Transaction Agreement or in certain disclosure schedules to the Transaction Agreement.

 

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Shareholders Meetings and Recommendations

Allergan has agreed to (i) convene or seek an order of the Irish High Court convening a meeting of its shareholders to approve the scheme of arrangement in accordance with the requirements of the Act and (ii) convene the extraordinary general meeting, in order to approve the resolutions required to effect the scheme, subject to the specified exception described in “ —Conditions to the Completion of the Acquisition—Termination ” beginning on page 93 below. Additionally, the Allergan board of directors has, subject to the specified exceptions described in “— Third-Party Acquisition Proposals ” beginning on page 82 below, recommended that Allergan’s shareholders vote to approve the scheme of arrangement at the special Court-ordered meeting and vote to approve the resolutions required to effect the scheme at the extraordinary general meeting. Thomas C. Freyman is not participating in that recommendation.

Third-Party Acquisition Proposals

Allergan has agreed in the Transaction Agreement that it will not and it will cause its subsidiaries and its and their respective directors, officers, employees not to, and it will use reasonable best efforts to cause its and its subsidiaries’ other representatives not to, directly or indirectly:

 

   

solicit, initiate or take any action to knowingly facilitate or knowingly encourage (including by way of furnishing information to any person in connection with) the submission of any Allergan Alternative Proposal (as defined below) or any indication, proposal or inquiry that would reasonably be expected to lead to an Allergan Alternative Proposal;

 

   

enter into or participate in any discussions or negotiations with, furnish any information relating to Allergan or any of its subsidiaries to, or afford access to the business, properties, assets, books or records of Allergan or any of its subsidiaries to, otherwise cooperate in any way with, or knowingly assist, participate in, knowingly facilitate or knowingly encourage any effort by, any third party that would reasonably be expected to seek to make, or has made, an Allergan Alternative Proposal (except Allergan may notify such a third party of the existence of the restrictions described in this section);

 

   

(A) withdraw or qualify, amend or modify in any manner adverse to AbbVie, the recommendation of the Allergan board of directors in favor of the scheme (referred to as the “scheme recommendation”) or the comparable recommendation if AbbVie should elect to implement the acquisition by way of a takeover offer, (B) fail to include the scheme recommendation in the document distributed to Allergan shareholders, (C) recommend, adopt or approve or publicly propose to recommend, adopt or approve any Allergan Alternative Proposal or (D) fail to reaffirm the scheme recommendation in a statement complying with Rule 14e-2(a) under the United States Securities Exchange Act of 1934 with regard to an Allergan Alternative Proposal or in connection with such action by the close of business on the 10th business day after the commencement of such Allergan Alternative Proposal under Rule 14e-2(a) (each of A, B, C and D referred to as an “Allergan change of recommendation”);

 

   

take any action to make any “moratorium,” “control share acquisition,” “fair price,” “supermajority,” “affiliate transactions” or “business combination statute or regulation” or other similar anti-takeover laws and regulations under applicable law inapplicable to any third party or any Allergan Alternative Proposal; or

 

   

enter into any agreement in principle, letter of intent, term sheet, merger agreement, acquisition agreement, option agreement or other agreement providing for or relating to an Allergan Alternative Proposal.

However, if at any time prior to the approval of the transaction by Allergan shareholders at the special meetings (and in no event after that time), the Allergan board of directors receives a written Allergan Alternative Proposal made after the date of the Transaction Agreement which has not resulted from a breach in any material respect of Allergan’s non-solicitation obligations described in this section, the Allergan board of directors, directly or indirectly through its representatives, may:

 

   

contact the third party that has made such Allergan Alternative Proposal in order to ascertain facts or clarify terms for the sole purpose of the Allergan board of directors informing itself about such Allergan Alternative Proposal and such third party, and

 

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(x) engage in negotiations or discussions with any such third party that has made such an unsolicited written Allergan Alternative Proposal, and (y) furnish to such third party and its representatives and financing sources nonpublic information relating to Allergan or any of its subsidiaries pursuant to a confidentiality agreement with terms no less favorable in the aggregate to Allergan than those contained in the confidentiality agreement between Allergan and AbbVie dated as of May 30, 2019, a copy of which will be provided, promptly after its execution, to AbbVie for informational purposes. In addition, all non-public information (to the extent that such information has not been previously provided or made available to AbbVie) must be provided or made available to AbbVie, as the case may be, substantially concurrently with the time it is provided or made available to such third party. Prior to and as a condition of taking any actions described in this bullet, the Allergan board of directors must determine in good faith, after consultation with a financial advisor of nationally recognized reputation and outside legal counsel, that such Allergan Alternative Proposal either constitutes or could reasonably be expected to lead to an Allergan Superior Proposal (as defined below).

Allergan must notify AbbVie promptly (but in any event within 48 hours) if any Allergan Alternative Proposal or any indication, proposal or inquiry by a third party that would reasonably be expected to make an Allergan Alternative Proposal, is received by Allergan. Each such notice must be provided in writing and must identify the third party making, and, to the extent applicable, the material terms and conditions (including price) of, any such Allergan Alternative Proposal, indication, proposal or inquiry. Following such initial notice, Allergan must keep AbbVie reasonably informed, on a reasonably current basis, of any material changes in the status and details of any such Allergan Alternative Proposal, indication, proposal or inquiry and will promptly (but in no event later than 24 hours after receipt) provide to AbbVie copies of all material correspondence and written materials sent or provided by or to Allergan or any of its subsidiaries (or any of its or their respective representatives) that describes any terms or conditions of any Allergan Alternative Proposal. Neither Allergan nor any of its subsidiaries will enter into any agreement with any person which prohibits Allergan from providing any information to AbbVie in accordance with, or otherwise complying with, the provisions described in this section.

Subject to AbbVie’s right to negotiate with Allergan to amend the Transaction Agreement in light of any Allergan Superior Proposal, prior to the approval of the transaction by Allergan shareholders at the special meetings (and in no event after that time), the Allergan board of directors may (A) make an Allergan change of recommendation, or (B) terminate the Transaction Agreement in order to substantially concurrently enter into a definitive agreement providing for an Allergan Superior Proposal if (x) in the case of such an action taken in connection with an Allergan Alternative Proposal, the Allergan Alternative Proposal has not been withdrawn and the Allergan board of directors determines in good faith, after consultation with outside legal counsel and a financial advisor of nationally recognized reputation, that such Allergan Alternative Proposal constitutes an Allergan Superior Proposal, or (y) in the case of an Allergan change of recommendation contemplated by clause (A) above involving or relating to an Allergan Intervening Event (as defined below) (and not involving any Allergan Alternative Proposal), the Allergan board of directors determines in good faith, after consultation with outside legal counsel and a financial advisor of nationally recognized reputation, that the failure to take such action would reasonably be expected to be inconsistent with its directors’ fiduciary duties under applicable law.

The Allergan board of directors and Allergan, as applicable, may not take any of the actions described in the previous paragraph unless prior to taking such action (i) Allergan has notified AbbVie, in writing at least three (3) business days before taking such action, that Allergan intends to take such action, which notice attaches, in the case of an Allergan change of recommendation in response to an Allergan Superior Proposal or the termination of the Transaction Agreement, the most current version of each proposed contract providing for or related to such Allergan Superior Proposal (including any contract relating to financing or expense reimbursement) and the identity of the third party(ies) making the Allergan Superior Proposal or, in the case of an Allergan Intervening Event, a reasonably detailed description of the facts relating to such Allergan Intervening Event, (ii) if requested by AbbVie, during such three (3) business day period, Allergan and its representatives will discuss and negotiate in good faith with AbbVie (to the extent that AbbVie desires to so discuss or negotiate)

 

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regarding any proposal by AbbVie to amend the terms of the Transaction Agreement in response to such Allergan Superior Proposal or other potential Allergan change of recommendation and (iii) after such three (3) business day period, the Allergan board of directors determines in good faith, after consultation with a financial advisor of nationally recognized reputation and outside legal counsel and taking into account any proposal by AbbVie to amend the terms of the Transaction Agreement, that in the case of any such action in connection with an Allergan Alternative Proposal, such Allergan Alternative Proposal continues to constitute an Allergan Superior Proposal (in the event of any amendment to the financial terms or other material terms of any such Allergan Superior Proposal, a new written notification from Allergan consistent with that described in clause (i) above is required, and a new notice period under clause (i) will commence, during which notice period Allergan will be required to comply with the requirements described in this paragraph anew, except that such new notice period will be for two business days (as opposed to three business days)). After delivery of such written notice described in this paragraph, Allergan will promptly inform AbbVie of all material developments affecting the material terms of any such Allergan Superior Proposal and will promptly provide AbbVie with copies of any additional written materials received or sent that are material to such Allergan Superior Proposal.

The Transaction Agreement provides that an “Allergan Alternative Proposal” means: any bona fide proposal or offer (including non-binding proposals or offers) from any person or group, other than AbbVie and its subsidiaries or any of its concert parties, relating to any (i) direct or indirect acquisition (whether in a single transaction or a series of related transactions) of assets of Allergan or any of its subsidiaries (including equity securities of its subsidiaries) equal to twenty percent (20%) or more of the consolidated assets of Allergan, or to which twenty percent (20%) or more of the revenues or earnings of Allergan on a consolidated basis are attributable for the most recent fiscal year for which audited financial statements are then available, (ii) direct or indirect acquisition (including by scheme of arrangement or takeover offer) or issuance (whether in a single transaction or a series of related transactions) of twenty percent (20%) or more of any class of equity or voting securities of Allergan, (iii) scheme of arrangement, tender offer, takeover offer or exchange offer that, if consummated, would result in a person or group beneficially owning twenty percent (20%) or more of any class of equity or voting securities of Allergan, or (iv) scheme of arrangement, merger, consolidation, share exchange, business combination, joint venture, reorganization, recapitalization or similar transaction involving Allergan or any of its subsidiaries, under which a person or group or, in the case of clause (B) below, the shareholders or equityholders of any person or group would, directly or indirectly, (A) acquire assets equal to twenty percent (20%) or more of the consolidated assets of Allergan, or to which 20% or more of the revenues or earnings of Allergan on a consolidated basis are attributable for the most recent fiscal year for which audited financial statements are then available, or (B) immediately after giving effect to such transactions, beneficially own twenty percent (20%) or more of any class of equity or voting securities of Allergan or the surviving or resulting person (including any parent person) in such transaction.

The Transaction Agreement provides that an “Allergan Superior Proposal” means: any bona fide , written Allergan Alternative Proposal (other than an Allergan Alternative Proposal which has resulted from a breach in any material respect of the non-solicitation provisions described in this section) (with all references to “twenty percent (20%)” in the definition of Allergan Alternative Proposal being deemed to be references to “fifty percent (50%)”) on terms that the Allergan board of directors determines in good faith, after consultation with its financial advisor and outside legal counsel, and taking into account all the terms and conditions of the Allergan Alternative Proposal that the Allergan board of directors considers to be appropriate (including the identity of the person making the Allergan Alternative Proposal and the expected timing and likelihood of consummation, any governmental or other approval requirements (including divestitures and entry into other commitments and limitations), break-up fees, expense reimbursement provisions, conditions to consummation and availability of necessary financing), is more favorable to the Allergan shareholders from a financial point of view than the acquisition (taking into account any proposal by AbbVie to amend the terms of the Transaction Agreement).

The Transaction Agreement provides that an “Allergan Intervening Event” means any material event, fact, change, effect, development or occurrence arising or occurring after the date of the Transaction Agreement that (i) was not known, or the material consequences of which were not known, in each case to the Allergan board of

 

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directors as of or prior to the date of the Transaction Agreement, (ii) does not relate to or involve any Allergan Alternative Proposal and (iii) does not relate to AbbVie or any of its subsidiaries.

The obligations of the parties under the Transaction Agreement are subject in all respects to the parties’ obligations under the Irish Takeover Rules.

Efforts to Consummate

Each of Allergan and AbbVie agreed to use their respective reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable (including by taking certain divestiture actions) to achieve satisfaction of the closing conditions and to consummate the acquisition as promptly as reasonably practicable following publication of the scheme of arrangement disclosure document and in any event no later than June 25, 2020 (September 25, 2020, if extended under the terms of the Transaction Agreement), including using reasonable best efforts to (x) prepare and file as promptly as reasonably practicable all necessary regulatory filings, (y) obtain prior to June 25, 2020 (September 25, 2020, if extended under the terms of the Transaction Agreement), and thereafter maintain, all clearances required to be obtained from any governmental entity that are necessary and advisable to consummate the acquisition and complying with the terms and conditions of each clearance (including by supplying any information that may be requested by regulatory authorities pursuant to applicable laws), and (z) cooperate with the other parties in their efforts to comply with their obligations under the Transaction Agreement.

Notwithstanding the above or anything else in the Transaction Agreement, neither AbbVie, Acquirer Sub nor any of their respective subsidiaries will be required to propose, agree to, commit to or effect any action (or refrain or cause to refrain from taking any action) (including, in each case, any divestiture, hold separate arrangement, licensing of rights, and/or termination, assignment, novation or modification of contracts (or portions of contracts) or other business relationships), restriction, commitment, condition, contingency, contribution, cost, expense, liability, limitation, loss, obligation, payment, requirement or term, with respect of any asset, operation, division, business, product line or business relationship of AbbVie, Allergan or any of their respective subsidiaries as a condition to or in connection with (i) the expiration or termination of any applicable waiting period relating to the acquisition under the HSR Act, (ii) obtaining any clearance under any other applicable antitrust laws or foreign investment laws or (iii) obtaining any other clearance from a governmental entity or otherwise. However, AbbVie will and will cause its subsidiaries to, if necessary to resolve, avoid or eliminate impediments or objections, if any, that may be asserted with respect to the acquisition under any antitrust law or foreign investment law commit to or effect (x) a divestiture, sale or license of (or subjecting to any hold-separate order) the assets and business relationships of Allergan and all of its subsidiaries (the “Allergan Group”), relating to certain specified products and (y) such other actions (including any divestiture, sale or license of (or subjecting to any hold-separate order)), with respect to any asset, operation, division, business, product line or business relationship of the Allergan Group (and not, for clarity, of AbbVie or any of its Subsidiaries) as would not, individually or in the aggregate, have (if effected) a material impact (with materiality measured relative to a company of the size and scale of the Allergan Group) on the condition (financial or otherwise), properties, assets, liabilities, business or results of operations AbbVie and its subsidiaries following the completion of the acquisition (provided that the impact of the actions contemplated by clause (x) will not be taken into account in assessing any impact under this clause (y)).

In addition, (x) neither Allergan nor AbbVie or any of their subsidiaries will be required to agree to or enter into any action which is not conditioned upon and does not become effective only upon the completion of the acquisition and (y) Allergan is not permitted to agree to any obligation, restriction, requirement, limitation, qualification, condition, remedy or other action relating to approvals under any antitrust law or foreign investment law required to be obtained by the Parties or their respective subsidiaries in connection with the acquisition without the prior written consent of AbbVie, but if requested by AbbVie, Allergan is required to take any such action to obtain governmental approvals required to complete the acquisition, subject to the preceding clause (x).

 

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Financing

Allergan is required to use its reasonable best efforts, and to cause each of its subsidiaries and its and their respective officers, employees and advisors and other representatives, to use their reasonable best efforts, to provide to AbbVie and its subsidiaries such assistance as may be reasonably requested by AbbVie in writing that is customary in connection with, among other things, (1) the arranging, obtaining and syndication of AbbVie’s financing and (2) certain exchange offers, offers to purchase and/or consent solicitations with respect to certain of Allergan’s outstanding debt securities, in each case subject to certain exceptions and qualifications.

The consummation of the transaction is not conditioned upon the consummation of, or the receipt by AbbVie of proceeds from, any debt financing.

Conduct of Business Pending the Completion Date

Allergan has agreed to use commercially reasonable efforts to conduct its business in the ordinary course of business consistent with past practice in all material respects and in compliance in all material respects with all applicable laws and to preserve intact its business organization and relationships with customers, members, suppliers, licensors, licensees and other third parties and keep available the services of its present officers and employees.

Allergan has also agreed that, except as may be prohibited or required by law or the Transaction Agreement or as set forth in the disclosure schedules to the Transaction Agreement, without AbbVie’s prior written consent (such consent not to be unreasonably withheld, conditioned or delayed), Allergan will not, and will not permit any of its subsidiaries to, among other things, undertake the following actions:

 

   

amend its organizational documents other than, with respect to each significant subsidiary of Allergan, amendments that would not prohibit or hinder, impede or delay in any material respect the consummation of the acquisition;

 

   

subject to the exceptions to Allergan’s non-solicitation obligations, (A) merge or consolidate with any other person, or acquire (including by merger, consolidation, or acquisition of stock or assets) any interest in any corporation, partnership, other business organization or any division or business thereof or any assets, securities or property that (in the case of such assets, securities or property) constitute all or a material portion of such person or any division or business thereof, other than (1) transactions (x) solely among Allergan and one or more of its wholly owned subsidiaries or (y) solely among Allergan’s wholly owned subsidiaries and (2) acquisitions of inventory or equipment in the ordinary course of business consistent with past practice, or (B) adopt a plan of complete or partial liquidation, dissolution, recapitalization or restructuring, other than a liquidation or dissolution of any of Allergan’s immaterial wholly owned subsidiaries;

 

   

(A) split, combine or reclassify any shares of its capital stock (other than transactions either solely among Allergan and one or more of its wholly owned subsidiaries or solely among Allergan’s wholly owned subsidiaries), (B) amend any term or alter any rights of any of its outstanding equity securities, (C) declare, set aside or pay any dividend or make any other distribution in respect of any equity securities other than (x) the declaration and payment by Allergan of quarterly cash dividends on the outstanding Allergan Shares in an amount per quarter not to exceed $0.74 per outstanding Allergan share and with the timing of the declaration, record and payment dates in any given quarter materially consistent with the timing of the declaration, record and payment dates for the comparable quarter in the prior fiscal year and (y) dividends or distributions by a subsidiary of Allergan to Allergan or a wholly owned subsidiary of Allergan or, or (D) redeem, repurchase, cancel or otherwise acquire or offer to redeem, repurchase, or otherwise acquire any of its equity securities or any equity securities of any subsidiary, other than repurchases of Allergan shares in connection with the exercise of Allergan options or the vesting or settlement of Allergan share awards (including in satisfaction of any amounts required to be deducted or withheld under applicable law) in accordance with the terms of such

 

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Allergan equity awards (I) outstanding as of June 25, 2019 (in accordance with their existing terms as of June 25, 2019) or (II) granted after June 25, 2019 (to the extent disclosed to AbbVie in the schedules prepared in conjunction with the Transaction Agreement) and (y) transactions among Allergan and its wholly owned subsidiaries or among Allergan’s wholly owned subsidiaries;

 

   

issue, deliver or sell, or authorize the issuance, delivery or sale of, any equity securities, other than (A) the issuance of any Allergan shares upon the exercise of Allergan options, the accrual of any dividend equivalents under any dividend equivalent rights applicable to any Allergan equity awards, or the vesting or settlement of the Allergan share awards, and/or the withholding of Allergan shares to satisfy tax obligations pertaining to the exercise of Allergan options or the vesting or settlement of Allergan equity awards or to satisfy the exercise price with respect to Allergan options or to effectuate an optionee direction upon exercise of any Allergan options that, in each case, (x) were outstanding as of June 25, 2019 (in accordance with their existing terms as of June 25, 2019), or (y) granted after June 25, 2019 (to the extent expressly permitted by the schedules prepared in conjunction with the Transaction Agreement), (B) transactions with respect to any employer stock fund under the Allergan benefit plans that are tax-qualified retirement or non-qualified supplemental savings retirement plans which are taken in accordance with the existing terms of such Allergan benefit plans as of June 25, 2019 and applicable law, or (C) in connection with transactions (1) solely among Allergan and one or more of its wholly owned subsidiaries or (2) solely among Allergan’s wholly owned subsidiaries;

 

   

authorize, make or incur any capital expenditures or obligations or liabilities in connection therewith in excess of $400 million in the aggregate during fiscal year 2019 or in excess of $87.5 million in the aggregate during any fiscal quarter in 2020;

 

   

sell, lease, license, transfer or otherwise dispose of any subsidiary of Allergan or any assets, securities or properties of Allergan and its subsidiaries, taken as a whole, other than (A) sales or dispositions of inventory, goods, services, tangible personal property (including equipment) or other immaterial assets, in each case in the ordinary course of business consistent with past practice, (B) transactions (1) solely among Allergan and one or more of its wholly owned subsidiaries or (2) solely among Allergan’s wholly owned subsidiaries or (C) any non-exclusive license of intellectual property granted in connection with a settlement of a claim of litigation entered into by Allergan or by any of its subsidiaries in the ordinary course of business consistent with past practice and in accordance with the terms of the Transaction Agreement;

 

   

sell, assign, license (including sublicense), abandon, allow to lapse, transfer or otherwise dispose of, or create or incur any lien (other than certain permitted liens) on, any material intellectual property, other than in the ordinary course of business consistent with past practice (A) pursuant to non-exclusive licenses, (B) for the purpose of abandoning, allowing to lapse or otherwise disposing of immaterial, obsolete or worthless assets or (C) for the purpose of abandoning or allowing to lapse patent applications or applications to register intellectual property during the ordinary course of prosecution;

 

   

(A) make any material loans, advances or capital contributions to any other person, other than (1) loans, advances or capital contributions (a) by Allergan to or in, as applicable, one or more of its wholly owned subsidiaries or (b) by any subsidiary of Allergan to or in, as applicable, Allergan or any wholly owned subsidiary of Allergan, or (2) capital contributions required under the terms of contracts in effect as of the date of the Transaction Agreement or (B) incur, assume, guarantee or repurchase or otherwise become liable for any indebtedness for borrowed money, issue or sell any debt securities or any options, warrants or other rights to acquire debt securities (in each case, whether, directly or indirectly, on a contingent basis or otherwise) or enter into any interest rate or currency swaps, forward currency or interest rate contracts or other interest rate or currency hedging arrangements other than (1) borrowings under Allergan’s or its subsidiaries’ existing credit facilities (as in effect as of the date of the Transaction Agreement) or credit facilities incurred in compliance with the Transaction Agreement in accordance with the terms thereof and commercial paper arrangements backstopped thereby, (2) intercompany indebtedness among Allergan and its wholly owned subsidiaries or among

 

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Allergan’s wholly owned subsidiaries, (3) indebtedness for borrowed money incurred to replace, renew, extend, refinance or refund any existing indebtedness of Allergan or any of its subsidiaries disclosed to AbbVie in the schedules prepared in conjunction with the Transaction Agreement, which indebtedness is (a) (i) prepayable or redeemable at any time (subject to customary notice requirements) without penalty (other than customary eurocurrency rate breakage) or (ii) on terms (including, with respect to tenor, that the tenor of such indebtedness does not exceed the tenor of the indebtedness being replaced, renewed, extended, refinanced or refunded at the time it was originally incurred) that are substantially consistent with those contained in the indebtedness being replaced, renewed, extended, refinanced or refunded (other than with respect to the interest rate applicable thereto, which will be on commercially reasonable terms) and (b) not in a principal amount greater than such indebtedness being replaced, renewed, extended, refinanced or refunded or, in the case of any “revolving” credit facility, the aggregate amount that may be incurred under the credit agreement governing such indebtedness being replaced, renewed, extended, refinanced or refunded (as in effect as of the date hereof), (4) guarantees of third-party indebtedness of Allergan or its wholly owned Subsidiaries outstanding on the date hereof or otherwise incurred in compliance with the Transaction Agreement and (5) entry by Allergan or its subsidiaries into interest rate or currency swaps, forward currency or interest rate contracts or other interest rate or currency hedging arrangements, in each case in the ordinary course of business consistent with past practice;

 

   

create or incur any lien (other than certain permitted liens) on any material assets or properties, other than (A) liens created or incurred in the ordinary course of business consistent with past practice, (B) pursuant to non-exclusive licenses or (C) liens that may be discharged at or prior to the completion of the acquisition;

 

   

(A) enter into any material contract other than in the ordinary course of business consistent with past practice (except that no material contract that is a collaboration agreement, product license agreement, joint venture or similar strategic partnership containing exclusivity or non-competition restrictions may be entered into), or (B) terminate, renew, extend or in any material respect modify or amend (including waiving, releasing or assigning any material right or claim thereunder) any material contract other than in the ordinary course of business consistent with past practice (except that no material contract that is a collaboration agreement, product license agreement, joint venture or similar strategic partnership containing exclusivity or non-competition restrictions may be terminated, renewed, extended or in any material respect modified or amended);

 

   

except as required by the terms of an Allergan benefit plan as in effect on June 25, 2019, (A) grant (or increase the value of) any change in control, equity or equity-based awards, or severance, termination or similar pay, to (or amend any existing arrangement with) any current or former director, officer, employee or individual independent contractor of Allergan or any of its subsidiaries (each, a “Covered Individual”), (B) enter into any employment, deferred compensation or other similar agreement (or any extension of, or amendment to, any such existing agreement) with any Covered Individual at global grade level 16 or above, (C) establish, adopt, enter into, amend or terminate any Allergan benefit plan (including any union or works council agreement) (subject to the permitted actions described in the following sentence), (D) increase, or accelerate the payment, vesting or funding of, the incentive, equity or equity-based awards, bonus opportunity or other compensation payable under any Allergan benefit plan or otherwise, (E) hire or terminate (other than for “cause”) any individual who would be upon hire (or is at the time of termination) at global grade level 16 or above, or (F) pay or provide any compensation or benefit to any Covered Individual at global grade level 16 or above, other than the continued payment of compensation and the continued provision of existing benefits in the ordinary course of business consistent with past practice. However, Allergan and its subsidiaries may (I) enter into or make amendments to such Allergan benefit plans and labor agreements in the ordinary course of business consistent with past practice that neither contravene the covenants described in this bullet nor materially increase the annual cost to Allergan of maintaining the affected Allergan benefit plans or other plan, trust, fund policy, practice, agreement or arrangement which would, if in effect on June 25,

 

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2019, constitute an Allergan benefit plan, (II) enter into third-party contracts for the provision of services to such Allergan benefit plans, including benefit administration, that will not materially increase the annual cost to Allergan of maintaining the affected Allergan benefit plan or other plan, trust, fund policy, practice, or agreement or arrangement, and (III) enter into (x) employment agreements with employees in the U.S. terminable on less than thirty (30)-days’ notice without penalty or liability and (y) employment agreements with employees in non-U.S. jurisdictions that are terminable without any liability beyond the minimum required by applicable law, in each case, in the ordinary course of business consistent with past practice and only with respect to any Covered Individual below global grade level 16;

 

   

make any material change in any method of financial accounting or financial accounting principles or practices, except for any such change required by reason of (or, in the reasonable good-faith judgment of Allergan, advisable under) a change in GAAP or applicable law or SEC policy;

 

   

(A) make, change or revoke any material tax election; (B) change the annual tax accounting period of any material subsidiary; (C) adopt or change any material method of tax accounting; (D) enter into any material closing agreement with respect to taxes; or (E) settle or surrender any material tax claim, audit or assessment (1) for an amount in excess of reserves therefor on the financial statements of Allergan and its subsidiaries or (2) if any term of such settlement or surrender may be reasonably expected to materially increase the tax liability of AbbVie, Allergan or their respective subsidiaries following the closing;

 

   

settle or compromise, or propose to settle or compromise, any action involving or against Allergan or any of its subsidiaries (including any action involving or against any officer or director of Allergan or any of its subsidiaries in their capacities as such, but excluding any action, audit, claim or other proceeding in respect of taxes), other than any settlement or compromise (or proposed settlement or compromise) that (A)(i) does not involve or otherwise relate to, directly or indirectly, any current or former Allergan product or any current or former material intellectual property owned by Allergan or material licensed intellectual property, (ii) is for an amount not to exceed $10 million individually or $50 million in the aggregate, and (iii) does not involve any material non-monetary relief, including anything that would restrict the operation or conduct of Allergan or any of its subsidiaries in any material respect (or, following the completion of the acquisition, of AbbVie or any of its subsidiaries in any material respect) or (B) solely involves matters in which Allergan and each of its subsidiaries party thereto (if any) is a plaintiff. However, in no case will Allergan or any of its subsidiaries settle any action set forth in Allergan’s disclosure schedules to the Transaction Agreement without the prior written consent of AbbVie; or

 

   

agree, commit or propose to do any of the otherwise-prohibited actions described above.

AbbVie has also agreed that, except as may be prohibited or required by law or the Transaction Agreement or as set forth in the disclosure schedules to the Transaction Agreement, without Allergan’s prior written consent (which consent will not be unreasonably withheld, conditioned or delayed), AbbVie will not, and will cause each of its subsidiaries not to, among other things, take the following actions:

 

   

amend AbbVie’s or Acquirer Sub’s organizational documents in any manner that would prohibit or hinder, impede or delay in any material respect the consummation of the transactions contemplated by the Transaction Agreement, including the acquisition; however, any amendment to its certificate of incorporation to increase the authorized number of shares of any class or series of the capital stock of AbbVie or to create a new series of capital stock of AbbVie is in no way restricted by this covenant;

 

   

acquire (including by merger, consolidation, or acquisition of stock or assets) any interest in any corporation, partnership, other business organization or any division thereof or any assets, securities or property, or otherwise purchase, lease, license or otherwise enter into a transaction, in each case that would prohibit or delay beyond June 25, 2020 (or September 25, 2020, if extended under the terms of the Transaction Agreement) the consummation of the transactions contemplated by the Transaction Agreement, including the acquisition;

 

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declare, set aside or pay any dividend or make any other distribution payable in cash, stock, property or any combination thereof in respect of any equity securities, other than (A) the declaration and payment by AbbVie of quarterly cash dividends on the outstanding shares of AbbVie common stock in an amount per quarter not to exceed $1.07 per outstanding share of AbbVie common stock (as such amount may be increased in a manner consistent with past practice by AbbVie) with the timing of the declaration, record and payment dates in any given quarter materially consistent with the timing of the declaration, record and payment dates for the comparable quarter in the prior fiscal year, and (B) dividends or distributions by a subsidiary of AbbVie to AbbVie or a wholly owned subsidiary of AbbVie;

 

   

split, combine or reclassify any of its capital stock, except for any such transaction by a wholly owned subsidiary of AbbVie which remains a wholly owned subsidiary after consummation of such transaction; or

 

   

agree, commit or propose to do any of the otherwise-prohibited actions described above.

Directors’ and Officers’ Indemnification and Insurance

For not less than six (6) years after the effective date, AbbVie will maintain in effect the provisions for indemnification, advancement of expenses and limitations of liability in the organizational documents of Allergan and its respective subsidiaries in favor of the current or former directors or officers of Allergan or any of their respective subsidiaries no less favorable than those provisions set forth in Allergan’s organizational documents on June 25, 2019 and, for a period of at least six (6) years from the effective date, will not amend, repeal or modify such provisions in any manner that would adversely affect the rights of any individuals who are entitled to such rights (unless such change is required by law and then only to the extent the change is required).

For a period of not less than six (6) years from the effective date, AbbVie will cause Allergan or any applicable subsidiary to indemnify and hold harmless each person who was on June 25, 2019, was previously, or during the period from June 25, 2019 through the date of the effective time, serving as a director or officer of Allergan or any of its subsidiaries, or at the request or for the benefit of Allergan or any of its subsidiaries as a director, trustee or officer of any other entity or any benefit plan maintained by Allergan or any of its subsidiaries (each referred to as an “indemnified party”), against any threatened, asserted, pending or completed action, whether instituted by any governmental entity or any other person, arising out of or pertaining to acts or omissions occurring at or prior to the effective time that relate to any such indemnified party’s duties or service (A) as a director or officer of Allergan or the applicable subsidiary thereof at or prior to the effective time (including with respect to any acts, facts, events or omissions occurring in connection with the approval of the Transaction Agreement, the scheme, the acquisition and the consummation of the other transactions contemplated hereby (including the acquisition), including the consideration and approval thereof and the process undertaken in connection therewith) or (B) as a director, trustee or officer of any other entity or any benefit plan maintained by Allergan or any of its subsidiaries (for which such indemnified party is or was serving at the request or for the benefit of Allergan or any of its subsidiaries) at or prior to the effective time (any such action referred to as a “director and officer claim”) and any losses, claims, damages, liabilities, claim expenses, judgments, fines, penalties and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of any thereof) relating to or resulting from a director and officer claim. For the same period, AbbVie will also cause Allergan or any applicable subsidiary to promptly advance to such indemnified party any claim expenses incurred in defending, serving as a witness with respect to or otherwise participating with respect to any director and officer claim in advance of the final disposition of such director and officer claim, including payment on behalf of or advancement to the indemnified party of any claim expenses incurred by the indemnified party in connection with enforcing any rights with respect to such indemnification and/or advancement, in each case without the requirement of any bond or other security, but subject to the indemnifying party’s receipt of a written undertaking by or on behalf of such indemnified party to repay such claim expenses if it is ultimately determined under applicable law that such indemnified party is not entitled to be indemnified.

 

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Prior to the effective time, Allergan may purchase (and pay in full the aggregate premium for) a six (6) year prepaid “tail” policy of at least the same coverage and amounts and containing terms and conditions that are no less favorable to the directors and officers of Allergan or any of its subsidiaries as Allergan’s and its subsidiaries’ existing directors’ and officers’ insurance policy or policies with a claims period of six (6) years from the effective time for director and officer claims arising from facts, acts, events or omissions that occurred on or prior to the effective time. However, the aggregate premium may not exceed three hundred percent (300%) of the annual amount currently paid by Allergan and its subsidiaries for such insurance (referred to as the “maximum rate”). If Allergan fails to obtain such tail insurance policy prior to the effective time, AbbVie will obtain such policy. If such policy cannot be obtained or can be obtained only by paying a premium in excess of the maximum rate, AbbVie is only required to obtain as much coverage as can be obtained by paying a premium equal to the maximum rate. AbbVie and Allergan will cause any such policy (whether obtained by AbbVie or Allergan) to be maintained in full force and effect, for its full term, and AbbVie will, following the effective time, cause Allergan to honor all of its obligations under the policy.

Employee Matters

From the effective time through the earlier of the second anniversary of the effective time and December 31, 2021 (as applicable, the “Continuation Period”), AbbVie will provide (i) each continuing Allergan employee with a base salary no less favorable than as provided immediately prior to the effective time, (ii) each continuing Allergan employee with a target annual cash bonus opportunity no less favorable than that in effect immediately prior to the effective time, (iii) for Allergan employees eligible to be selected to receive an annual equity compensation opportunity, in the form determined by AbbVie, continued eligibility to be selected to receive an annual equity compensation opportunity with a target grant date value no less than the target grant date value applicable to his or her global grade level as of June 25, 2019 under Allergan’s equity plan guidelines and (iv) for Allergan employees as a group, employee benefits that are no less favorable in the aggregate than those provided to Allergan employees immediately prior to the effective time. For purposes of clause (iv), defined benefit pension plans, nonqualified deferred compensation plans, subsidized retiree health or welfare benefits, post-termination health or welfare benefits and retention or change in control payments and awards will be excluded from the comparability standard.

During the Continuation Period, AbbVie will provide each Allergan employee who experiences a severance-qualifying termination of employment with severance benefits no less favorable than those to which such employee would have been entitled under the Allergan severance plan, policy, program, agreement or arrangement in which such Allergan employee was eligible to participate as of immediately prior to the effective time (disregarding any changes made after June 25, 2019 without AbbVie’s advance written consent), but only to the extent such Allergan severance plan, policy, program, agreement or arrangement is set forth in the disclosure schedules and was provided to AbbVie prior to June 25, 2019. Notwithstanding anything to the contrary in the foregoing, for each Allergan employee eligible to participate in the “Allergan severance plans” (as defined below) as of the effective time, if such employee experiences a severance-qualifying termination of employment during the two-year period immediately following the effective time, AbbVie will provide such employee with severance benefits no less favorable than those he or she would have received under the applicable Allergan severance plan. “Allergan severance plan” means (i) the Allergan Change of Control Severance Plan, effective as of March 18, 2017, (ii) the Allergan 2017 Executive Severance Plan, effective as of July 20, 2017, and (iii) the Allergan Employee Severance Pay Plan, effective as of July 3, 2017, as amended January 1, 2018.

AbbVie will recognize Allergan employees’ length of employment with Allergan or its subsidiaries for purposes of determining eligibility, vesting and level of benefits under their benefit plans providing benefits to Allergan employees to the same extent and for the same purpose as such service was recognized under the Allergan benefit plans, except that length of employment will not be recognized (i) by any AbbVie defined benefit pension plan, (ii) by any AbbVie retiree medical plan or post-termination health or welfare benefit plan, (iii) by any AbbVie benefit plan that is frozen or for which participation is limited to a grandfathered population or (iv) for any cash- or equity-based compensation arrangements, subject to limited exceptions. Service will not

 

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be credited if it would result in a duplication of benefits or compensation for the same period of service. Service will only be credited to the extent such service is credited for similarly situated AbbVie employees.

Waiting periods under any AbbVie benefit plan that replaces a comparable Allergan benefit plan will be waived for an Allergan employee to the extent the Allergan employee participated in and had already satisfied any such waiting periods under the Allergan benefit plan prior to the effective time. AbbVie will use its reasonable best efforts to waive any actively-at-work requirements and preexisting condition limitations under AbbVie’s medical, dental, pharmaceutical and vision plans if the requirements and limitations were not applicable prior to the effective time under the corresponding Allergan medical, dental, pharmaceutical and/or vision benefit plan. For medical, dental, pharmaceutical and/or vision benefit plans, AbbVie will also use its reasonable best efforts to credit eligible expenses incurred by Allergan employees under Allergan’s medical, dental, pharmaceutical and/or vision benefit plans during the portion of the applicable plan year prior to the date on which Allergan employees move into the corresponding AbbVie plans (if applicable) toward deductibles, coinsurance and maximum out-of-pocket requirements under the corresponding AbbVie plans for the same such plan year.

Prior to the effective time, AbbVie and Allergan will cooperate in respect of consultation obligations and similar notice and bargaining obligations owed to employees or consultants of Allergan or its subsidiaries, or any of their respective bargaining representatives, in accordance with applicable laws and works council and other bargaining agreements, if any.

Conditions to the Completion of the Acquisition

The scheme and the completion of the acquisition are conditioned on the satisfaction (or waiver, by the appropriate party to the extent permitted by law) of among other things:

 

   

the approval of the scheme at the special Court-ordered meeting (or at any adjournment of such meeting);

 

   

the extraordinary general meeting resolutions other than the specified compensatory arrangement resolution and the adjournment resolution being duly passed by the Allergan shareholders at the extraordinary general meeting (or at any adjournment of such meeting);

 

   

the Irish High Court’s sanction of the scheme of arrangement (without material modification) and related reduction of capital and registration of the Court Order and minute with the Registrar of Companies;

 

   

the approval for listing on the New York Stock Exchange (subject only to official notice of issuance) of all of the shares of AbbVie common stock to be issued in the acquisition;

 

   

all applicable waiting periods under the HSR Act in connection with the acquisition having expired or having been terminated, and, to the extent applicable, any agreement between Allergan and AbbVie, on the one hand, and the FTC or the Antitrust Division, on the other hand, not to consummate the scheme or the acquisition having expired or been earlier terminated;

 

   

to the extent (i) the Acquisition constitutes a concentration within the scope of the EC Merger Regulation or otherwise is a concentration that is subject to the EC Merger Regulation, the European Commission having decided to allow the closing of the Acquisition, or (ii) that all or part of the Acquisition is referred by the European Commission to the relevant authority of one or more member countries of the European Economic Area, such relevant authority(ies) (in the case of a partial referral in conjunction with a final decision of the European Commission) having issued a final decision or decisions which satisfies (or together satisfy) the prior clause (i);

 

   

all required clearances of any governmental entity having been obtained and remaining in full force and effect and all applicable waiting periods having expired, lapsed or been terminated (as appropriate), in

 

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each case in connection with the acquisition, under the antitrust laws of the U.S., European Union, China, Brazil, Canada, Israel, Mexico, Japan, South Africa, South Korea, Turkey and the United Kingdom (only in the event of any exit by the United Kingdom from, or suspension or termination of its membership in, the European Union such that a United Kingdom governmental entity has jurisdiction to review the acquisition under antitrust laws) (each a “required antitrust jurisdiction”);

 

   

(a) no order, writ, decree, judgment or injunction (whether temporary or permanent) has been issued, promulgated, made, rendered or entered into by any court or other tribunal of competent jurisdiction, and (b) no law (excluding any antitrust law other than those of a required antitrust jurisdiction) has been enacted, issued, promulgated, enforced or entered and continues in effect and, in each case of clauses (a) and (b), restrains, enjoins, makes illegal or otherwise prohibits the consummation of the acquisition;

 

   

the Transaction Agreement not having been terminated in accordance with its terms;

 

   

the absence of a material adverse effect with respect to each party since June 25, 2019;

 

   

the accuracy of each of the parties’ representations and warranties, subject to specified materiality standards; and

 

   

the performance and compliance by each party, in all material respects, with all of its covenants and agreements under the Transaction Agreement.

AbbVie reserves the right, subject to the prior written approval of the Irish Takeover Panel (if required), to effect the acquisition by way of a takeover offer, as an alternative to the scheme, in the circumstances described in and subject to the terms of the Transaction Agreement. In such event, such takeover offer will be implemented on terms and conditions that are at least as favorable to Allergan shareholders and equity award holders (except for an acceptance condition set at 80 percent (80%) of the nominal value of the Allergan shares to which such offer relates and which are not already beneficially owned by AbbVie) as those which would apply in relation to the scheme, among other requirements.

The acquisition is also conditioned on the scheme becoming effective and unconditional by not later than June 25, 2020 (or September 25, 2020, if extended under the terms of the Transaction Agreement). In addition, the scheme will lapse unless it is effective on or prior to June 25, 2020.

Survival of Representations and Warranties

None of the representations and warranties of the Transaction Agreement will survive the consummation of the transaction or the termination of the Transaction Agreement.

Termination

The Transaction Agreement may be terminated at any time prior to the effective time in any of the following ways:

 

   

by mutual written consent of Allergan and AbbVie;

 

   

by either Allergan or AbbVie:

 

   

if the special Court-ordered meeting or the extraordinary general meeting has been completed and the special Court-ordered meeting resolution or the required resolutions, as applicable, have not been approved by the requisite majorities;

 

   

if the acquisition has not been consummated by 5:00 p.m., New York City time, on June 25, 2020 (or September 25, 2020, if extended under the terms of the Transaction Agreement) (except that the right to terminate the Transaction Agreement pursuant to this provision is not available to a

 

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party whose breach of any provision of the Transaction Agreement is the primary cause of the failure of the acquisition to be consummated by 5:00 p.m., New York City time, on June 25, 2020 (or September 25, 2020, if extended under the terms of the Transaction Agreement));

 

   

if the Irish High Court declines or refuses to sanction the scheme, unless both parties agree in writing that the decision of the Irish High Court will be appealed (it is agreed that Allergan will make such an appeal if requested by AbbVie and the counsel appointed by AbbVie and by Allergan agree that doing so is a reasonable course of action);

 

   

if there is in effect any (x) law other than an order, writ, decree, judgment or injunction described in clause (y) (excluding any antitrust law of any jurisdiction that is not a required antitrust jurisdiction) in any jurisdiction of competent authority or (y) final and non-appealable order, writ, decree, judgment, or injunction issued, promulgated, made, rendered or entered into by any court or other tribunal of competent jurisdiction, that, in the case of each of clauses (x) and (y), permanently restrains, enjoins, makes illegal or otherwise prohibits the consummation of the acquisition (except that the right to terminate the Transaction Agreement pursuant to this provision is not available to any party whose breach of any provision of the Transaction Agreement was the primary cause of such law, order, writ, decree, judgment or injunction);

 

   

by Allergan:

 

   

if AbbVie or Acquirer Sub breaches or fails to perform in any material respect any of its covenants or other agreements contained in the Transaction Agreement or if any of its representations or warranties set forth in the Transaction Agreement are inaccurate such that the breach, failure to perform or inaccuracy (1) would result in the failure of certain closing conditions and (2) the breach, failure to perform or inaccuracy is not reasonably capable of being cured by June 25, 2020 (or September 25, 2020, if extended under the terms of the Transaction Agreement) or, if curable, is not cured by the earlier of June 25, 2020 (or September 25, 2020, if extended under the terms of the Transaction Agreement) and 30 days following written notice by Allergan;

 

   

prior to obtaining the approval of the Allergan shareholders at both special meetings of the scheme of arrangement and the resolutions required to effect the scheme, if (1) the Allergan board of directors authorized Allergan to terminate the Transaction Agreement in response to an Allergan Superior Proposal and (2) substantially concurrently with such termination, a definitive agreement providing for the consummation of such Allergan Superior Proposal is duly executed and delivered by all parties thereto and, prior to or substantially concurrently with such termination, Allergan pays AbbVie any amounts due under the expenses reimbursement agreement (only costs and expenses for which AbbVie has submitted to Allergan a written request for reimbursement and written support for such request prior to such termination in accordance with the expenses reimbursement agreement will be due substantially concurrently with such termination);

 

   

by AbbVie:

 

   

if Allergan breaches or fails to perform in any material respect any of its covenants or other agreements contained in the Transaction Agreement or if any of its representations or warranties set forth in the Transaction Agreement are inaccurate such that the breach, failure to perform or inaccuracy (1) would result in the failure of certain closing conditions and (2) the breach, failure to perform or inaccuracy is not reasonably capable of being cured by the earlier of June 25, 2020 (or September 25, 2020, if extended under the terms of the Transaction Agreement) or, if curable, is not cured by the earlier of June 25, 2020 (or September 25, 2020, if extended under the terms of the Transaction Agreement) and 30 days following written notice by Allergan thereof;

 

   

if, prior to the receipt of approval of the Allergan shareholders of the scheme of arrangement and the resolutions required to effect the scheme, an Allergan change of recommendation has occurred.

 

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Expenses

Except as otherwise provided in the Transaction Agreement or in the expenses reimbursement agreement (see “ Expenses Reimbursement Agreement ” beginning on page 97 of this proxy statement), all costs and expenses incurred in connection with the acquisition will be paid by the party incurring such cost or expense, except the following: (i) the Irish Takeover Panel’s document review fees will be paid by AbbVie, (ii) the costs associated with the filing, printing, publication and posting of the Rule 2.5 Announcement will be borne one hundred percent (100%) by AbbVie, (iii) the costs associated with the filing, printing, publication and proposing of the Scheme Document, proxy statement and any other materials required to be proposed to Allergan shareholders pursuant to SEC rules, the Act or the Irish Takeover Rules will be borne one hundred percent (100%) by Allergan, (iv) the filing fees incurred in connection with notifications with any governmental entities under any antitrust laws, will be borne one hundred percent (100%) by AbbVie and (v) the cost incurred in connection with soliciting proxies in connection with the special Court-ordered meeting and the extraordinary general meeting will be borne one hundred percent (100%) by Allergan.

Reverse Termination Payment

The Transaction Agreement also provides that, in the event of a termination of the Transaction Agreement as described in the next sentence, AbbVie will pay Allergan a reverse termination fee of approximately two percent (2%) of the implied transaction equity value of approximately $63 billion as of June 24, 2019. The reverse termination fee is owed when there is a valid termination of the Transaction Agreement if:

 

   

the effective time has not occurred by 5:00 p.m., New York City time, on June 25, 2020 (or September 25, 2020, if extended under the terms of the Transaction Agreement) if, on the date of such termination, each of the conditions has been satisfied (other than any of conditions related to antitrust clearance); or

 

   

there is in effect pursuant to or in connection with an antitrust law in any of the required antitrust jurisdictions any (x) law other than an order, writ, decree, judgment or injunction described in clause (y) in any jurisdiction of competent authority or (y) final and non-appealable order, writ, decree, judgment, or injunction issued, promulgated, made, rendered or entered into by any court or other tribunal of competent jurisdiction, that, in the case of each of clauses (x) and (y), permanently restrains, enjoins, makes illegal or otherwise prohibits the consummation of the acquisition;

Amendment and Waiver

The Transaction Agreement may not be amended except by an instrument in writing signed by each of the parties, except that following approval of the scheme by the Allergan shareholders there will be no further amendment which by applicable law would require further approval by the Allergan shareholders without such further approval nor will there be any amendment or change not permitted under applicable law. No delay or omission by either party to the Transaction Agreement in exercising any right, power or remedy provided by law or under the Transaction Agreement will operate as a waiver. Furthermore, certain provisions of the Transaction Agreement may not be amended without the prior written consent of sources of financing for the acquisition.

Specific Performance; Third-Party Beneficiaries

The parties agreed in the Transaction Agreement that irreparable harm would occur and that the parties would not have any adequate remedy at law for any breach of the provisions of the Transaction Agreement or in the event that any provisions of the Transaction Agreement were not performed in accordance with their specific terms. Except where the Transaction Agreement is validly terminated, as described above, each party is entitled to seek an injunction or injunctions to prevent breaches or threatened breaches of the Transaction Agreement and to specifically enforce the terms and provisions of the Transaction Agreement, without proof of actual damages, and each party agreed to waive any requirement for the securing or posting of any bond in connection with such remedy.

 

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The Transaction Agreement is not intended to confer upon any person other than Allergan and AbbVie any rights or remedies with the exception of the rights of the specified directors, officers and employees to certain indemnification and insurance and certain rights provided to the financing sources of AbbVie in the Transaction Agreement.

 

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EXPENSES REIMBURSEMENT AGREEMENT

The following is a summary of certain material terms of the expenses reimbursement agreement. This summary is qualified in its entirety by reference to the expenses reimbursement agreement, which is incorporated by reference in its entirety and attached to this proxy statement as Annex C. We encourage you to read the expenses reimbursement agreement carefully and in its entirety.

Concurrently with the execution of the Transaction Agreement, AbbVie and Allergan entered into the Expenses Reimbursement Agreement dated as of June 25, 2019, referred to as the expenses reimbursement agreement. Under the expenses reimbursement agreement, the terms of which have been consented to by the Irish Takeover Panel for the purposes of Irish Takeover Rule 21.2 only, Allergan has agreed to reimburse all documented, specific, quantifiable third-party costs and expenses incurred, directly or indirectly, by AbbVie and/or its subsidiaries, or on its behalf, for the purposes of, in preparation for, or in connection with the acquisition including third-party costs and expenses incurred in connection with exploratory work carried out in contemplation of and in connection with the acquisition, legal, financial and commercial due diligence, arranging financing and engaging advisors to assist in the process, up to one percent (1%) of the aggregate value of the total scheme consideration (other than scheme consideration payable on shares of Allergan ordinary shares held by AbbVie or by persons deemed to be acting in concert with AbbVie under Irish Takeover Rules and the cash resulting from the aggregation and sale of fractional shares). Allergan has agreed to so reimburse AbbVie if:

 

  (i)

AbbVie terminates the Transaction Agreement prior to Allergan obtaining the required Allergan shareholder approvals at both special meetings due to the Allergan board of directors making an Allergan change of recommendation; or

 

  (ii)

Allergan terminates the Transaction Agreement prior to obtaining the required Allergan shareholder approvals at both special meetings in response to an Allergan Superior Proposal in compliance with the non-solicitation provisions of the Transaction Agreement and, substantially concurrently with such termination, a written definitive agreement providing for the consummation of the transactions contemplated by such Allergan Superior Proposal is duly executed and delivered by Allergan and all other parties thereto; or

 

  (iii)

all of the following occur:

 

   

either AbbVie terminates the Transaction Agreement if Allergan breached or failed to perform in any material respect any of its covenants or other agreements contained in the Transaction Agreement, which breach or failure to perform (1) would have resulted in a failure of Allergan’s obligation to perform and comply with the covenants contained in the Transaction Agreement in all material respects and (2) was not reasonably capable of being cured by June 25, 2020 (or September 25, 2020, if extended under the terms of the Transaction Agreement) or, if curable, is not cured by the earlier of (A) June 25, 2020, as extended under the terms of the Transaction Agreement and (B) 30 days following written notice by AbbVie thereof, or either AbbVie or Allergan terminates the Transaction Agreement if the special Court-ordered meeting or the extraordinary general meeting was completed and the resolutions to be proposed at those meetings under and which passage is required by the Transaction Agreement, as applicable, were not approved by the requisite majorities; and

 

   

prior to the special Court-ordered meeting, an Allergan Alternative Proposal, which definition for the purpose of this and the following bullet is modified so that references to “twenty percent (20%)” in the definition are deemed to refer to “fifty percent (50%),” was publicly disclosed or announced (or, in the case of a termination by AbbVie of the Transaction Agreement where Allergan breaches or fails to perform its covenants or other agreements found in the Transaction Agreement under certain conditions, was made publicly or privately to the Allergan board of directors), or any person has publicly announced an intention (whether or not conditional) to make an Allergan Alternative Proposal; and

 

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(x) an Allergan Alternative Proposal under the Transaction Agreement is consummated within twelve (12) months after such termination, or (y) a definitive agreement providing for an Allergan Alternative Proposal is entered into within twelve (12) months after such termination and is subsequently consummated.

Upon AbbVie becoming entitled to a reimbursement payment under the expenses reimbursement agreement, Allergan will have no further liability in connection with the valid termination of the Transaction Agreement (other than the obligation to pay the reimbursement payments required by the expenses reimbursement agreement), whether under the Transaction Agreement or the expenses reimbursement agreement or otherwise, to AbbVie, its subsidiaries or its shareholders. However, the expenses reimbursement agreement does not release any party from liability (including any monetary damages or other appropriate remedy) for a material breach of the expenses reimbursement agreement or the Transaction Agreement that is the consequence of an act or omission by a party with the actual knowledge that the taking of such act or such omission to take action would be a material breach of such agreement, for fraud or as provided for in the confidentiality agreement by and between AbbVie and Allergan, dated May 30, 2019.

J.P. Morgan and Allergan have each confirmed in writing to the Irish Takeover Panel that the expenses reimbursement agreement is in the best interests of the Allergan shareholders in the context of the acquisition.

 

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FINANCING RELATING TO THE TRANSACTION

AbbVie estimates that it will need approximately $41 billion in order to pay Allergan shareholders the cash consideration due to them under the Transaction Agreement and to pay related fees, premiums, costs, expenses and other transaction costs in connection with the acquisition. AbbVie anticipates that the funds needed to pay the foregoing amount will be derived from (i) cash on hand, (ii) borrowings under its existing and new credit facilities, including as described below, (iii) the proceeds from the sale of debt securities or (iv) any combination of the foregoing. In addition, either prior to or after the closing of the acquisition, AbbVie may conduct one or more exchange offers, offers to purchase and/or consent solicitations with respect to Allergan’s outstanding debt securities. The terms and timing of any such debt offerings, exchange offers, offers to purchase and/or consent solicitations has not been determined as of the date of this proxy statement. This proxy statement is not intended to and does not constitute an offer to sell or the solicitation of an offer to subscribe for or buy or an invitation to purchase or subscribe for any debt securities of AbbVie or Allergan. No offer of debt securities will be made in the United States absent registration under the Securities Act, or pursuant to an exemption from, or in a transaction not subject to, such registration requirements.

Morgan Stanley & Co. LLC, acting through its affiliate Morgan Stanley & Co. International plc, financial advisor to AbbVie, is satisfied that sufficient resources are available to satisfy in full the cash consideration payable to Allergan shareholders under the terms of the transaction.

Bridge Credit Agreement

On June 25, 2019, AbbVie entered into the Bridge Credit Agreement among AbbVie, certain lenders from time to time party thereto and Morgan Stanley Senior Funding, Inc. as administrative agent. Under the Bridge Credit Agreement, the lenders party thereto have committed to provide AbbVie with unsecured bridge financing in an aggregate principal amount of $38.0 billion. The commitments are intended to be available to finance, in part, the cash component of the scheme consideration, fees and expenses related thereto and the repayment of Allergan’s existing revolving credit facility. The commitments under the Bridge Credit Agreement were reduced by $6.0 billion upon the execution of the Term Loan Credit Agreement described below.

Term Loan Credit Agreement

On July 12, 2019, AbbVie entered into the Term Loan Credit Agreement among AbbVie, certain lenders from time to time party thereto and Morgan Stanley Senior Funding, Inc. as administrative agent. Under the Term Loan Credit Agreement, the lenders party thereto have committed to provide AbbVie with unsecured term loan financing consisting of (i) a $1.5 billion 364-day term loan tranche, (ii) a $2.5 billion three-year term loan tranche and (iii) a $2.0 billion five-year term loan tranche, in an aggregate principal amount of $6.0 billion. AbbVie intends to draw upon such commitments upon the consummation of the transaction to finance, in part, the cash component of the scheme consideration, fees and expenses related thereto and the repayment of Allergan’s existing revolving credit facility.

Summary of Terms of the Bridge Credit Agreement and the Term Loan Credit Agreement

The funding of the loans under each Credit Agreement is conditioned on, among other things, the consummation of the transaction and the absence of certain events of default described in each Credit Agreement. The commitments under each Credit Agreement automatically terminate on the earlier of (a) the date on which all of the certain funds purposes have been achieved without the making of any advances under the facility and (b) the time after a mandatory cancellation event occurs, including June 25, 2020 (subject to extension to September 25, 2020 in accordance with the end date set forth in the Transaction Agreement).

The borrower may voluntarily prepay the loans under each Credit Agreement at any time without premium or penalty. The Bridge Credit Agreement also requires mandatory prepayments with the net cash proceeds

 

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received by AbbVie in connection with certain asset sales, debt or equity issuances and recovery events, subject to customary exceptions. Each Credit Agreement also contains customary events of default, upon the occurrence of which, and for so long as such event of default is continuing, the amounts outstanding under such Credit Agreement will accrue interest at an increased rate and payments of such outstanding amounts could be accelerated by the lenders. In addition, the loan parties under each Credit Agreement will be subject to certain affirmative and negative covenants.

 

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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

(Dollar amounts presented in millions, except share data)

The following unaudited pro forma condensed combined financial information gives effect to the acquisition. The unaudited pro forma condensed combined financial information has been prepared using the acquisition method of accounting under U.S. GAAP under which the assets and liabilities of Allergan are recorded by AbbVie at their respective fair values as of the date the acquisition is completed. The unaudited pro forma condensed combined balance sheet data as of June 30, 2019 give effect to the acquisition as if it had occurred on June 30, 2019. The unaudited pro forma condensed combined statements of earnings for the year ended December 31, 2018 and for the six months ended June 30, 2019 give effect to AbbVie’s results of operations as if the acquisition had occurred on January 1, 2018.

The following unaudited pro forma condensed combined statement of earnings for the year ended December 31, 2018 is based on, has been derived from and should be read in conjunction with the historical audited financial statements of AbbVie (which are available in AbbVie’s Form 10-K for the year ended December 31, 2018) and the historical audited financial statements of Allergan (which are available in Allergan’s Annual Report on Form 10-K for the year ended December 31, 2018), which have been incorporated in this proxy statement by reference. The following unaudited pro forma condensed combined statement of earnings for the six months ended June 30, 2019 and unaudited pro forma condensed combined balance sheet as of June 30, 2019 are based on, have been derived from and should be read in conjunction with the historical unaudited financial information of AbbVie for the six months ended June 30, 2019 (which is available in AbbVie’s Form 10-Q for the period ended June 30, 2019) and the historical unaudited financial information of Allergan for the six months ended June 30, 2019 (which is available in Allergan’s Form 10-Q for the period ended June 30, 2019), which have been incorporated in this proxy statement by reference.

The unaudited pro forma condensed combined financial information set forth below gives effect to the following:

 

   

the completion of the acquisition, with each Allergan Shareholder receiving (i) $120.30 in cash and (ii) 0.8660 of a newly issued share of AbbVie common stock for each Allergan ordinary share, subject to adjustment in accordance with the share cap; and

 

   

the incurrence of approximately $37.2 billion in debt by AbbVie or an affiliate to (i) finance, in part, the cash component of the acquisition consideration and (ii) pay certain transaction expenses in connection with the acquisition.

The pro forma adjustments are preliminary and are based upon available information and certain assumptions which AbbVie management believes are reasonable under the circumstances and which are described in the accompanying notes to the unaudited pro forma condensed combined financial information. Actual results may differ materially from the assumptions within the accompanying unaudited pro forma condensed combined financial information. Under the acquisition method of accounting under U.S. GAAP, generally all assets acquired and liabilities assumed are recorded at their respective fair values as of the date the acquisition is completed. For pro forma purposes, the fair value of Allergan’s tangible and identifiable intangible assets acquired and liabilities assumed are based on a preliminary estimate of fair value as of June 30, 2019. Any excess of the purchase price over the fair value of identified assets acquired and liabilities assumed will be recognized as goodwill. Certain current market based assumptions were used which will be updated upon completion of the acquisition. Management believes that the fair values recognized for the assets to be acquired and liabilities to be assumed are based on reasonable estimates and assumptions.

Preliminary fair value estimates of assets and liabilities may change as additional information becomes available and such changes could be material.

 

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The unaudited pro forma condensed combined financial information has been prepared by AbbVie management in accordance with the regulations of the SEC and has been presented for informational purposes only and is not necessarily indicative of the combined financial position or results of operations that would have been realized had the acquisition occurred as of the dates indicated, nor is it meant to be indicative of any anticipated combined financial position or future results of operations that AbbVie will experience after the acquisition. In addition, the accompanying unaudited pro forma condensed combined statement of earnings does not include any expected cost savings, operating synergies, or revenue enhancements, which may be realized subsequent to the acquisition or the impact of any non-recurring activity and one-time transaction-related or integration-related costs. No material transactions existed between AbbVie and Allergan during the pro forma period.

Neither the unaudited pro forma condensed combined financial information nor the estimates and assumptions referred to in connection therewith have been approved by Allergan, and Allergan has not been involved in their preparation.

This unaudited pro forma condensed combined financial information should be read in conjunction with the accompanying notes and assumptions as well as the historical consolidated financial statements and related notes of AbbVie and Allergan incorporated by reference into this proxy statement.

 

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AbbVie Unaudited Pro Forma Condensed Combined Balance Sheet

As of June 30, 2019

 

    Historical                                
(in millions)   AbbVie     Allergan after
reclassifications
(Note 4)
    Acquisition
adjustments
    Note
reference
    Financing
adjustments
    Note
reference
    Pro forma
combined
 

Assets

             

Current assets

             

Cash and equivalents

  $ 5,172     $ 1,651     $ (39,462     5a     $ 37,200       5l     $ 4,246  
        (217     5d       —        
        (98     5i       —        

Short-term investments

    244       322       —           —           566  

Accounts receivable, net

    5,482       3,086       —           —           8,568  

Inventories

    1,895       1,005       3,700       5e       —           6,600  

Prepaid expenses and other

    2,307       2,508       —           —           4,815  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total current assets

    15,100       8,572       (36,077       37,200         24,795  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Investments

    1,473       55       —           —           1,528  

Property and equipment, net

    2,879       1,821       —           —           4,700  

Intangible assets, net

    20,459       41,232       24,918       5f       —           86,609  

Goodwill

    15,642       42,341       (25,718     5j       —           32,265  

Other assets

    1,589       1,460       —           —           3,049  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total assets

  $ 57,142     $ 95,481     $ (36,877     $ 37,200       $ 152,946  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Liabilities and Equity

             

Current liabilities

             

Short-term borrowings

  $ 306     $ —       $ —         $ 1,500       5l     $ 1,806  

Current portion of long-term debt and finance lease obligations

    5,335       3,094       —           —           8,429  

Accounts payable and accrued liabilities

    11,300       5,210       —           —           16,510  
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total current liabilities

    16,941       8,304       —           1,500         26,745  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Long-term debt and finance lease obligations

    31,619       19,609       506       5g       35,700       5l       87,434  

Deferred income taxes

    1,148       4,968       3,320       5h       —           9,436  

Other long-term liabilities

    16,000       2,904       —           —           18,904  

Commitments and contingencies

             

Stockholders’ equity (deficit)

             

Common stock

    18       —         3       5b       —           21  

Common stock held in treasury, at cost

    (24,505     —         —           —           (24,505

Additional paid-in capital

    15,028       55,812       (55,812     5k       —           34,095  
        18,527       5b       —        
        540       5c       —        

Retained earnings

    3,384       2,581       (2,581     5k       —           3,286  
        (98     5i       —        

Accumulated other comprehensive loss

    (2,491     1,282       (1,282     5k       —           (2,491
 

 

 

   

 

 

   

 

 

     

 

 

     

 

 

 

Total stockholders’ equity (deficit)

    (8,566     59,675       (40,703