AbbVie has recommended that shareholders vote against its proposed takeover of Shire, effectively pulling the plug on the proposed $54 billion deal.
The board said the decision was taken after “a detailed consideration of the impact of the US Department of Treasury's unilateral changes to the tax rules” announced last month. AbbVie added that “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 US firm said 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”.
AbbVie chief executive Richard Gonzalez said “we have rigorous standards in place to ensure transactions are financially sound and deliver compelling stockholder returns. 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”.
Shire said it is "considering the current situation and a further announcement will be made in due course".