US pharmaceutical company AbbVie said it was reconsidering its $55-billion takeover of Shire in the wake of US government moves to curb deals designed to cut tax, wiping $13 billion off the London-listed firm’s stock price.
Chicago-based AbbVie said late on Tuesday it was responding to the US proposals which aim to make it harder for American firms to shift their tax bases out of the US and into lower cost jurisdictions in Europe. AbbVie’s move for Shire, a leader in drugs to treat attention deficit hyperactivity disorder and rare diseases, 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, which applies low tax rates to patent income and has passed laws that make it easy for companies to shift profits into tax havens.
The news hammered shares in Shire, sending them down 27 per cent, 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 four per cent while replacement knees and hips maker Smith & Nephew, which had also been touted as a target, slipped three per cent.
AbbVie’s move wrongfooted Shire investors, coming just weeks after AbbVie chief executive Richard Gonzalez, in the wake of the Treasury proposals, told employees of both companies he was “more energised than ever” about the deal.
Also tax advisers had said the Treasury measures were unlikely to significantly impact most inversion deals.
Although the new rules will make some deals costlier and others more difficult, fast-food chain Burger King Worldwide Inc said it will proceed with its $11.5 billion transaction with Canada’s Tim Hortons.
Gonzalez had said Shire’s appeal stretched far beyond its tax domicile, pointing to its portfolio of drugs, some of which command prices of hundreds of thousands of pounds for an annual course of treatment, and its pipeline.
Buying Shire would reduce AbbVie’s reliance on its Humira drug, the world’s top selling arthritis medicine which loses US patent protection in 2016.
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AbbVie reconsiders $55-bn Shire deal after US tax changes