Billions of dollars were wiped off the value of European healthcare companies yesterday after the Obama administration threatened action to halt the wave of transatlantic acquisitions by American companies seeking to cut their US tax bills.
The sharp fall in several Irish, Swiss and British companies reflected investor fears that one of the main driving forces behind this year’s surge of cross-border dealmaking in the healthcare sector could be brought to a halt by US political intervention.
Shares in Walgreens, the US pharmacy chain, were also hit after it confirmed it would pass up an opportunity to move its tax home to Switzerland in another sign that the time for so-called tax inversions could be drawing to a close.
Walgreens announced a well-trailed £6 billion deal to acquire full control of Switzerland-based Alliance Boots – but without an inversion that could have saved the company billions of dollars in taxes.
The decision followed a warning from the US treasury on Tuesday that it was “reviewing a broad range of authorities for possible administrative action” to deter companies from using cross-border deals to escape US taxes.
Lawmakers in Congress who have led attacks on inversion deals welcomed the decision by Walgreens to remain US- based.
But congressional staff said the U-turn did not signal victory in the broader fight against inversions and vowed that work would continue on legislation to curb them.
Shire, the Dublin-headquartered pharmaceuticals company, was the biggest victim of the European sell-off as investors worried that its £32 billion takeover by AbbVie of the US could be imperilled. Its stock was down 4.6 per cent at £46.54, well below the £52.48 a share cash and stock offer agreed with AbbVie last month.
AstraZeneca, the British drugmaker which was the subject of a failed £69.4 billion bid from Pfizer in May, was down almost 4 per cent, as was Smith & Nephew, the medical devices maker considered to be another inversion target.
Actelion, the Swiss biotech company, and Alkermes, an Irish-based drugmaker, were both down about 2.5 per cent. Shares in Walgreens fell 12.5 per cent. – (Copyright The Financial Times Limited 2014)