AbbVie/Shire deal looking shaky

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AbbVie (ABBV) is considering scrapping the planned £32.4bn ($51.5bn) acquisition of pharma firm Shire Plc (SHP) as another possible casualty of the US crackdown on so-called tax inversions.

After AbbVie’s announcement that its board will meet by October 20 to reconsider its recommendation that shareholders approve the deal, Shire’s share value has plunged to the lowest level in 12 years. 

AbbVie had expected to lower its tax burden by buying Shire and moving its legal address to the UK (aka ‘tax inversion’), and Shire said the deal should proceed.

If the proposed deal goes ahead it would be the biggest inversion completed so far. Investors are said to be “shocked” at the news that the deal may now be in jeopardy.

Jeffrey Holford, an analyst at Jefferies LLC in New York, said that: “Investor reaction is one of confusion and shock and we hope this will be resolved quickly.” 

According to a company statement, once AbbVie’s board meet, they will consider factors including the impact of the tax changes on “the fundamental financial benefits of the transaction”.  

If the deal comes off, AbbVie will diversify its drug portfolio by gaining Shire’s treatments for attention deficit hyperactivity disorder.

Shire is based in Dublin for tax purposes, however its main executive offices are in Basingstoke, and AbbVie has said the combined company’s tax domicile would be in the U.K.

The deal was worth about $55 billion when it was announced. AbbVie’s decision to reconsider the deal with Shire indicated to some investors that other tax inversion deals are less likely.

Earlier this year, UK pharma firm AstraZeneca walked away from a takeover from US giant Pfizer in a similar ‘tax inversion’ deal.