To the surprise of nobody, AbbVie and Shire have agreed to terminate their proposed $55 billion merger, leaving the Ireland-domiciled group with a $1.64 billion breakup fee to bank.
The deal was dead in the water after AbbVie recommended that its shareholders vote against the deal, citing the impact of the US Department of Treasury's changes to tax rules. The latter is designed to stop American companies using foreign takeovers as a means to lower their taxes.
AbbVie CEO attacks US laws
AbbVie chief executive Richard Gonzalez said “the unprecedented unilateral action” by the Treasury “may have destroyed the value in this transaction, but it does not resolve a critical issue facing American businesses today”. He claimed that the US tax code is “outdated and is putting global US-based companies at a disadvantage to foreign competitors in an area of critical importance, specifically investing in the USA”.
He concluded by saying that “comprehensive tax reform is essential to create competitiveness and to stimulate investment in the economy”.
On this side of the pond, Shire seemed less angry and chairman Susan Kilsby said that “whilst we are disappointed that the offer will not now complete, we continue to enjoy excellent prospects as we execute our plan to double Shire’s product sales to $10 billion by 2020”.
Break-up fee in bank by tonight
Shire’s board had rejected AbbVie’s initial advances and says it “believes strongly that, as an independent company, Shire’s focused growth strategy will continue to deliver significant shareholder value and patient benefits”. The $1.64 billion cheque will be in its hands by 5pm tonight (October 21) and Shire is being linked to a number of potential purchases of its own, including NPS Pharmaceuticals and Cubist.
In the USA, rumours emerged that major shareholders in Allergan, itself being chased by Valeant, are urging the company to bid for Shire.
News that the AbbVie deal is officially dead came hours after it was announced that Shire interim chief financial officer James Bowling will at the end of the first quarter of 2015 to join water firm Severn Trent.