AbbVie leaves $50bn Shire deal for dead following US tax rule changes

By Dan Stanton

- Last updated on GMT

AbbVie-Shire megamerger unlikely to happen following U-turn in the boardroom
AbbVie-Shire megamerger unlikely to happen following U-turn in the boardroom

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AbbVie’s proposed £31bn ($50bn) takeover of Shire is very likely “dead” after the US biopharma's board changed its recommendation and advised shareholders not to back the bid.

AbbVie’s £31bn bid for UK-based pharma firm Shire seemed to be the one megamerger success story of the past six months, after Pfizer failed to seduce AstraZeneca​ and Valeant continues to coyly chase Allergan​.

However, after the US Department of Treasury issued changes to tax rules in September, AbbVie’s Board of Directors decided yesterday the acquisition would not bring the benefits highlighted when the two companies shook hands in July.

“Although the strategic rationale of combining our two companies remains strong, 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,”​ AbbVie’s CEO Richard Gonzalez said in a statement.

The tax rules affect the deal in a “significant manner,”​ the company said, eliminating a number of financial benefits including the ability to access current and future global cash flows efficiently.

Though there are still chances a merger could happen, the “transaction is likely dead,”​ Jefferies analyst Peter Welford said in a note. “The withdrawal of recommendation does not itself "kill" the merger, but we believe it is likely both parties may now agree with the UK Takeover panel to let the agreement lapse.”

This U-turn is “completely incongruent with AbbVie’s recent rhetoric,”​ he said, but added Shire would be left in a strong position when the dust settles, despite the likelihood of downward pressure on Shire's shares today.

“Historically, ‘noise’ surrounding M&A transactions can cause significant disruptions in the target company’s operations. However, we note that Shire's fundamentals appear to have remained steady,”​ Welford commented, adding sales of its ADHD drug Vyvanse continues to grow, while its anti-inflammatory drug Lialda is growing in excess of 20% year-on-year.

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