AbbVie reconsiders Shire deal over tax laws
pharmafile | October 15, 2014 | News story | Medical Communications, Sales and Marketing | AbbVie, Abbott, Obama, Shire, US, mergers, tax
AbbVie will reconsider its planned $54.6 billion takeover of Shire in light of new US proposals designed to curb companies avoiding tax by moving overseas.
One of the main motivations behind AbbVie’s deal to acquire the Irish firm was the chance to base its company in the UK and Ireland to shield offshore cash from US taxes. Barclays estimated that the deal would have resulted in savings of up to $1.3 billion for the firm.
Shire announced the deal in July after rejecting AbbVie several times, but soon afterwards president Barack Obama and the US Treasury announced that they would clamp down on ‘tax inversion’, where companies based in the country look to avoid US taxes through cross-border deals.
The proposed new rules include a ban on intra-company loans to overseas arms and preventing the former owners of the US company from owning more than 80% of the combined firm.
AbbVie says that it is now considering the impact of the changes on “the fundamental financial benefits of the transaction”, but adds that it has not yet withdrawn from the deal or recommended that it be modified.
In a statement Shire adds that it believes AbbVie should proceed with the takeover, but in the event that it decides not to the US firm will have to pay a break fee of approximately $1.635 billion to Shire.
Ana Nicholls, healthcare analyst at The Economist Intelligence Unit, says: “It is hardly surprising that AbbVie is rethinking its Shire merger in the light of the new US tax inversion rules. Earlier this month, Salix cited the new rules when it pulled out of a merger with Cosmo, another Irish company.
“But there are other benefits to the Shire merger besides tax savings. AbbVie faces patent expiry on its main product, Humira, in 2016 and is keen for new product to help fill its pipeline. Shire not only offers a strong line-up of ADHD drugs but also a promising portfolio of drugs for rare diseases, which command a higher price from insurers and health funds.
“This is only a rethink, in short, and AbbVie’s board may instead recommend a modification of the deal – which could mean trying to renegotiate the price or change other terms of the deal.
She adds that it is notable that Shire chief executive, who resisted AbbVie’s initial offers so strongly, is now proclaiming his enthusiasm for the arrangement.
Tax inversion deals have become quite common for US-based pharma companies, with Pfizer, Endo, Mylan and Actavis all attempting them both successfully and unsuccessfully in recent years.
Pfizer’s attempted takeover of British-based AstraZeneca fell through earlier this year after the deal was rebuffed by AZ, who seem intent on continuing as an independent company.
Shire has said that it will ‘consider the current situation’ and will make a further announcement soon.
George Underwood
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