AbbVie reconsiders Shire deal after US Treasury proposes tax inversion rule changes

 
Lynsey Barber
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AbbVie is reconsidering its deal for Shire (Source: Getty)

AbbVie is reconsidering its takeover of UK drugmaker Shire - and it could come at a hefty price.

The US pharmaceutical firm is reconsidering the $54bn (£32bn) deal in light of the US government’s proposals to change rules aimed at ending tax inversion deals - the popular practice of US firms relocating their headquarters to countries with more favourable tax rates through a foreign takeover.

AbbVie said the board of directors would meet next week to review its takeover plans:

It said: 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 22 September, 2014, including the impact to the fundamental financial benefits of the transaction.

Accordingly, AbbVie has notified Shire under the Co-operation Agreement that AbbVie's Board of Directors intends to meet to consider whether to withdraw or modify its recommendation. Under the Agreement, AbbVie must provide three business days' notice of any intention to consider a change in recommendation. Accordingly, AbbVie's Board plans to meet on October 20, 2014, unless Shire agrees to waive the notice.

The discussions will not affect the course of the deal unless AbbVie shareholders decide against the merger, the company added.

In Shire’s response this morning, the firm said AbbVie had not provided it with any detailed analysis of its “tax assumptions” and it “does not quantify the anticipated financial impact of the US Treasury Notice on the combination”.

The UK firm, which is also meeting to discuss the developments, said it believes the deal should go ahead, noting that AbbVie would owe a pretty hefty $1.635bn in break fees if the deal did not go through.

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