Teva to cut over 25% of workforce, suspends dividend
14,000 people will lose their jobs
Teva Pharmaceutical Industries (TEVA) announced a restructuring plan intended to “significantly reduce its cost base, unify and simplify its organization and improve business performance, profitability, cash flow generation and productivity.”
The two year restructuring plan is intended to reduce Teva’s total cost base by $3B by the end of 2019, out of an estimated cost base for 2017 of $16.1B.
More than half of the reduction is expected to be achieved by the end of 2018.
The company expects to record a restructuring charge as a result of the implementation of the plan in 2018 of at least $700M, mainly related to severance costs, with additional charges possible following decisions on closures or divestments of manufacturing plants, R&D facilities, headquarters and other office locations.
These steps are expected to result in the reduction of 14,000 positions globally – excluding the impact of any future divestments – over 25% of Teva’s total workforce – over the next two years.
The majority of the reductions are expected to occur in 2018, with most of the affected employees being notified within the next 90 days.
Restructuring efforts will be done in accordance with applicable local requirements.
Consultations with the relevant employee representatives will begin in the near term.
In addition to the restructuring plan, Teva is announcing the following measures to address the company’s financial situation: The company will immediately suspend dividends on ordinary shares and ADSs, while dividends on mandatory convertible preferred shares will be evaluated on a quarterly basis per current practice; Teva’s annual bonus for 2017 will not be paid due to the fact that the company’s financial results are significantly below our original guidance for the year; The company will continue to review the potential for additional divestment of non-core assets;
Teva will provide full guidance for 2018 in February with the annual results and will share a longer-term strategic direction for the company later in 2018.
TEVA closed at $15.70. It last traded at $17.65.
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