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Massive merger between US and Dublin-based big pharma outfits looks dead in the water

AbbVie seems almost certain to walk away from the €43 billion agreement because of US tax rule changes.

BIG PHARMA FIRM AbbVie has said its shareholders should knock back a planned $55 billion (€43 billion) merger with Ireland-headquartered Shire.

The US pharmaceuticals company said the agreement was no longer good value for stock owners because of its government’s manoeuvres to stop firms shifting their tax bases offshore to boost their profits.

AbbVie chief executive Richard Gonzalez told investors the rule changes meant there was an “unacceptable level of uncertainty”  to the deal.

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,” he said.

AbbVie will hold a shareholder meeting before 14 December to make a final decision on the deal, although Shire stands to walk away with a $1.65 billion (€1.30 billion) “break fee” if the US company decides to ditch the merger.

Inversion oversion

Three weeks ago the US Treasury said it was introducing a series of changes to cut the financial advantage to firms shifting their tax bases overseas in so-called “inversion” deals.

Several US companies have either moved their tax homes to Ireland or planned similar set-ups in recent years in arrangements worth nearly €100 billion just in the first half of 2014.

The profit-shifting has drawn a fiery response from President Barack Obama who pointed the finger at both the republic and “unpatriotic” domestic firms trying to avoid their taxes.

Shire shed more than 30% of its share price yesterday after AbbVie’s board announced it was rethinking the merger and late yesterday the company said it wanted to speed up the decision-making process to “allow the period of uncertainty for its shareholders, employees and other stakeholders to be reduced”.

READ: Tax inversions inverted: US moves on loopholes used by Ireland-based companies >

READ: The €100 billion deals: that’s how much was spent on Irish mergers so far this year >

About the author:

Peter Bodkin  / Editor, Fora

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