AbbVie Weighing Shire Breakup Sends Inversion Target Shares Down

This content was published on October 15, 2014 - 08:54

2 minutes

Oct. 15 (Bloomberg) — AstraZeneca Plc and other health- care companies considered to be tax-friendly takeover targets fell after U.S. pharmaceutical company AbbVie Inc. said it was reconsidering its $51.5 billion bid for Shire Plc.

AstraZeneca, a London-based drugmaker that spurned a takeover offer from Pfizer Inc. this year, dropped 3.5 percent to 42.54 pounds at 9:22 a.m. in London. Smith & Nephew Plc, a British maker of artificial hips and knees that had been a potential target for Stryker Corp. of Kalamazoo, Michigan, declined 2.9 percent to 946 pence. Actelion Ltd., a Swiss drugmaker, fell 1.1 percent to 103.10 Swiss francs.

Shire’s stock plunged the most in 12 years after AbbVie said earlier today its board will meet by Oct. 20 to reconsider its recommendation that shareholders approve the deal. The U.S. company cited changes to tax regulations announced Sept. 22 by the U.S. Treasury Department. In response, Shire said the deal should proceed.

“It’s a strong sign these Treasury department rules are having an effect on these companies,” said Odile Rundquist, an analyst at Helvea SA in Geneva. “Without the tax benefits, the price is too high.”

If AbbVie of North Chicago, Illinois, scraps the planned acquisition, it would be the biggest casualty of the U.S. crackdown on so-called tax inversions. While Shire is based in Dublin for tax purposes, its main executive offices are in Basingstoke, England, and AbbVie has said the combined company’s tax domicile would be in the U.K.

A U.K. home is attractive to companies for several reasons. The corporate tax rate there is 21 percent and scheduled to decline to 20 percent next year, compared with 35 percent in the U.S. Also, unlike the U.S., the U.K. doesn’t tax the profits companies earn outside the country.

To contact the reporters on this story: Kristen Hallam in London at khallam@bloomberg.net; Oliver Staley in London at ostaley@bloomberg.net To contact the editors responsible for this story: Phil Serafino at pserafino@bloomberg.net Marthe Fourcade, Thomas Mulier