AbbVie has officially terminated its offer for Shire, blaming tax changes in the US which “destroy the financial benefits” of tax inversion mergers.
The news comes as no surprise given that AbbVie had recommended last week that its shareholders vote against the $55bn deal, but Shire and AbbVie agreed to bring the matter to a speedy conclusion and render a shareholder meeting unnecessary. The two companies have also confirmed that a break-up fee of $1.635bn will be payable to Shire by the close of business today.
AbbVie said the changes to the US tax environment “introduced an unacceptable level of risk and uncertainty” into the takeover and – after a review in conjunction with its financial advisors – the company concluded that the deal was no longer in the best interests if its shareholders.
For its part, Shire said it had decided it was in the best interest of all those involved to bring the situation to a speedy conclusion and agree with AbbVie to terminate the agreement, with chairman Susan Kilsby adding that the company still has “excellent prospects” as it moves ahead with plans to double sales to $10bn by 2020.
The windfall from the unravelling of the takeover deal could come in handy for Shire, which suggested it is now casting for another transaction and has been linked to a possible merger with Allergan, which is currently trying to fend off unwanted advances from Canada’s Valeant.
A link between Shire and Allergan already has the support of one of Allergan’s investors – hedge fund Paulson & Co – according to news reports, although none of the parties has commented publicly on the potential of such a deal.
Nevertheless, the aborted merger has disrupted the UK-listed company and earlier this week announced the departure of interim chief financial officer James Bowling. It will be keen to emphasise the strength and potential of the business when it reports third-quarter results later this week.
…AbbVie hit out at US government
AbbVie’s chief executive Richard Gonzalez hit out at the US Treasury changes as the episode came to a close, saying the measures do not “resolve a critical issue facing American businesses today, namely the “outdated” tax code which it claims is putting US businesses at a disadvantage to foreign competitors, particularly with regard to investing within the US.
“Comprehensive tax reform is essential to create competitiveness and to stimulate investment in the economy,” he said.
Despite the $1.635bn termination fee, AbbVie said it was planning a $5bn share buyback, and as a sweetener to any unhappy shareholders has said it would increase its dividend to 49 cents from February next year.