AbbVie to reconsider $55-bn Shire deal
15 October 2014
The board of US drug firm AbbVie Inc. yesterday said that it plans to reconsider recommending that shareholders vote in favour of its planned $55 billion (£32 billion) takeover of Ireland-based Shire Plc after the US Treasury changed tax rules to prevent so called ''corporate inversions''.
Illinois-based AbbVie, which planned to lower its US tax liability by acquiring Dublin-based Shire and relocate its headquarters abroad, said that it has notified Shire that its board intends to reconsider the recommendation made on 18 July in light of the proposed changes to US tax laws announced by the US Treasury on 22 September.
''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 September 22, 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,'' AbbVie said in a statement.
AbbVie, the maker of top-selling arthritis drug Humira, plans to buy Shire to lower its US tax burden by moving its tax base to Ireland and to diversify its product line-up.
But a spate of recent overseas acquisitions made by US companies in order to move their tax base to countries having lower tax rates has forced the US Treasury to unveil harsh changes on corporate inversions.
US companies argue that reincorporating into countries with low tax rates would bring them on level playing field against global competitors who pay lower taxes. But US lawmakers have criticised such moves as unpatriotic.
The Shire acquisition would allow AbbVie to slash its tax rate by almost half.
In July, Shire agreed to a $55-billion takeover by US rival AbbVie. Under the deal, Shire shareholders would receive £53.20 in cash and stock. (See: Shire's board agrees to £32-bn takeover by AbbVie)
AbbVie would hold 75 per cent of the new entity, while Shire investors would get the remaining 25 per cent.
With major operations in the US, UK and Switzerland, and a network of offices and distribution channels throughout Europe, South America, Canada, and the Pacific Rim, Dublin-based Shire provides treatments in neuroscience, rare diseases, gastrointestinal, and internal medicine.
Some of its rare-disease drugs include Elaprase for Hunter syndrome and Replagal for Fabry disease.
It employs over 5,000 people in 29 countries and posted net income of $665 million in 2013 on revenues of $4.9 billion.
AbbVie, which split from Abbott Laboratories in January 2013, is a specialty-focused, research-based biopharmaceutical company having 15 research and manufacturing facilities around the world.
It posted net income of $4.1 billion in 2013 on revenues of $18.8 billion.