AbbVie (ABBV) is walking back its plan to buy Shire Plc (SHPG) on concerns over new U.S. laws making it harder for American companies to lower taxes through inversions, or overseas dealmaking. SHPG dropped 25% on the news, though AbbvVie has not finalized the decision.
ABBV notified Shire’s Board of Directors late on Tuesday night of its intention to reconsider the recommendation, made on July 18, that AbbVie stockholders adopt the proposed Shire-AbbVie merger agreement. AbbVie said its board “will consider, among other things, the impact of the U.S. 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.”
AbbVie’s Board of Directors has not officially withdrawn its recommendation.
AbbVie had remained publicly optimistic about a deal getting done even after regulators’ most recent offensive against tax-inversions, which is why the market is taking Wednesday’s announcement so hard.
If the deal falls apart Shire is entitled to a $1.64 billion breakup fee, or just over $8.00 per share. The stock had risen some 50% in the wake of rumors that Abbvie would make an offer for the Irish drug developer, which focuses on rare diseases. The $54 billion deal would have lowered AbbVie’s corporate tax rate to an astounding 13%, according to the company.
