AbbVie doubts Shire takeover in wake of tax changes

AbbVie has said it may withdraw from its $55 billion takeover of Shire in light of the US government’s clampdown on tax inversion deals.

The news has prompted a collapse in Shire’s UK-listed shares, which were down almost 25 per cent this morning after it emerged AbbVie was reconsidering its offer. Shire said in a statement that it “believes AbbVie should proceed with the recommended offer on the agreed terms.”

AbbVie said in a statement issued late yesterday that its board would meet next week to reconsider the recommendation to proceed with the takeover.

The latest development is something of a volte face for AbbVie chief executive Richard Gonzalez, who just a few days ago was assuring workers at Shire in an open letter – published in the Wall Street Journal – that the takeover would proceed as planned. The company had reportedly also suggested it might try to raise $7 billion more than it originally expected to complete the Shire takeover as a result of the new tax regulations.

The new measures announced by the US Treasury last month have already caused some companies to reconsider inversion-led deals – scuppering Salix‘s planned merger with Italy’s Cosmo and causing Auxilium to dump QLT at the altar in order to tie up with Endo – but AbbVie’s planned takeover of Shire is a much bigger scalp.

AbbVie has placed the prospect of cutting its corporation tax rate from 22 per cent to around 13 per cent via a Shire takeover at the heart of the deal, but has consistently denied this was the primary driver. Analysts have suggested that the tax breaks could save AbbVie $5 billion to $8 billion in tax paid on Humira profits over the next 15 years.

The latest revelation suggests that tapping into Shire’s fast-growing rare disease portfolio and profitable attention-deficit hyperactivity (ADHD) franchise is a secondary consideration.

Shire negotiated a clause in its agreement with AbbVie that specifies any changes to US tax law are not grounds to back away from the takeover and says it would pocket a break-up fee of almost $1.64 billion if AbbVie walks.

“The board will meet to consider the current situation and a further announcement will be made in due course,” said Shire.

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