AbbVie Reconsidering Merger with Shire on US Tax Regulations

AbbVie Inc, the U.S. drug manufacturer announced Tuesday that it will be reconsidering the merger with Dublin-based rival Shire on account of the recent tax regulations rolled out by the Obama government lately.

The U.S. government has been critical of such mergers and acquisitions that redirect U.S. taxes to other countries. This tax inversion has gained a lot of notoriety of late and therefore, the government announced in September that the cash generated overseas by the acquired or merged firm cannot be used to make purchases in the U.S.

In light of the new tax rules, AbbVie said that its board would meet to either withdraw or modify the merger deal with Shire.

Shire also acknowledged that it had received an overnight notice from AbbVie regarding the reconsideration and recommended that the company continue the deal. In case, the Chicago-based drug maker had a change of mind, it would be liable to pay a break fee of $1.63 billion.

As per the agreed-to deal, Shire shareholders will get $41.78 and 0.8960 of AbbVie shares for each unit they own. If completed, the deal will make the merged firm one of the biggest players in the pharma industry with annual revenues amounting to $25 billion. Also, Shire would end up owning 25 percent of the new company under the terms of the deal.

AbbVie had been in talks with Shire for a merger for quite some time now. The Humira-manufacturer was rebuffed by Shire a couple of times before the board finally approved the deal just in time for the offer's deadline.

The new company, if formed, will be listed on the New York Stock Exchange. Shire was valued at $48 billion at the time of the announcement of the deal in July but the recent developments sent its stock tumbling 25 percent at London's Wednesday trade. 

AbbVie's shares were also down 4.40 percent before Wednesday's opening trade at the NYSE.