AbbVie cools on $55bn Shire deal after US tax changes

Chicago-based AbbVie said it was reconsidering its $55 billion takeover of Dublin-headquartered Shire weeks after the USgovernment moved to curb deals designed to reduce tax, wiping $13 billion off the London-listed firm's stock price.

AbbVie said late on Tuesday it was responding to the proposals which aim to make it harder for American firms to shift their tax bases out of the U.S. and into lower cost jurisdictions in Europe.

AbbVie’s move for Shire, a leader in drugs to treat attention deficit hyperactivity disorder (ADHD), was announced in July amid a spate of similar takeover deals within the US and European pharmaceutical sector.

It proposed creating a new US-listed holding company with a tax domicile in Britain, where the government has also introduced tax breaks designed to encourage research and development.

The news hammered shares in Shire, sending them down 27 per cent and back to where they were before the deal talks emerged in June.

Shares in larger rival AstraZeneca, which had rebuffed its own takeover deal by US group Pfizer fell 4 per cent while replacement knees and hips maker Smith & Nephew, which had also been touted as a target, slipped 3 per cent.

AbbVie had recently said it was still committed to the deal, which would have reduced the reliance on its Humira drug, the world’s top selling arthritis medicine which loses US patent protection in 2016.

Were AbbVie to renege on its recommendation for the deal to shareholders it could have to pay a break fee of around $1.6 billion to Shire.

“AbbVie’s board will consider, among other things, the impact of the US Department of Treasury’s proposed unilateral changes to the tax regulations announced on September 22nd,” AbbVie said.

The US firm said its board would meet on October 20th to consider whether to withdraw or modify its recommendation on the deal with Shire.

Shire, which said its trading had remained strong, urged AbbVie to push ahead with the deal.

“The board of Shire believes that AbbVie should proceed with the recommended offer on the agreed terms in accordance with the Cooperation Agreement,” Shire said on Wednesday.

Shire said that it had not been provided with a detailed analysis of AbbVie’s tax assumption.

Reuters