The billion-pound deal between AbbVie and Shire could be over.
AbbVie has recommended shareholders vote against the proposed $54bn (£32bn) deal to buy UK drugmaker Shire, essentially ending the takeover bid and sending Shire shares down an initial 12 per cent when markets opened this morning.
The US pharmaceutical firm AbbVie said it was rethinking the acquisition yesterday in the wake of the US Treasury’s plans to curb so-called “tax inversion” deals.
Shire's share price recovered slightly in early trading, down 10 per cent at pixel time, following on from yesterdays tumble which wiped £13bn from its value after AbbVie revealed its rethink.
AbbVie chief executive Richard Gonzalez said: “Although the strategic rationale of combining our two companies remains strong, the agreed upon valuation is no longer supported as a result of the changes to the tax rules and we did not believe it was in the best interests of our stockholders to proceed.”
The company said in a statement:
The breadth and scope of the changes, including the unexpected nature of the exercise of administrative authority to impact longstanding tax principles, and to target specifically a subset of companies that would be treated differently than either other inverted companies or foreign domiciled entities, introduced an unacceptable level of uncertainty to the transaction.
Additionally, the changes eliminated certain of the financial benefits of the transaction, most notably the ability to access current and future global cash flows in a tax efficient manner as originally contemplated in the transaction.
This fundamentally changed the implied value of Shire to AbbVie in a significant manner.
If shareholders vote against the deal, AbbVie will owe Shire a $1.6bn break fee.
Shire said it is considering the current situation and further announcement would be made in due course.