AbbVie terminates £32bn merger with Shire

After US Treasury tightens its rules to stop companies making deals that would allow them to reduce tax bills

AbbVie and Shire have terminated their proposed £32bn merger after AbbVie’s Board withdrew support for the deal.

The company walked away from the transaction after the US Department of Treasury tightened its rules to stop companies making deals that would allow them to redomicile overseas to cut corporate tax rates.

The US company said in July that it expected the transaction to reduce its tax rate to approximately 13% by 2016, compared with its current rate of approximately 22% if it redomiciled in the UK.

AbbVie said the US Treasury had 're-interpreted longstanding tax principles in a uniquely selective manner designed specifically to destroy the financial benefits of these types of transactions'.

The unprecedented unilateral action by the US Department of Treasury may have destroyed the value in this transaction

Richard Gonzelez, AbbVie’s Chairman and Chief Executive, said: 'AbbVie has built a strong, sustainable strategy with a robust pipeline. Over the past 22 months we have delivered industry leading stockholder returns, our performance and business fundamentals remain strong, and we are on the cusp of a major new product launch with our treatment for HCV. We remain focused on building AbbVie’s business through enhanced internal R&D platforms, partnerships, strong commercial execution and licensing and acquisitions.'

He added: 'The unprecedented unilateral action by the US Department of Treasury may have destroyed the value in this transaction, but it does not resolve a critical issue facing American businesses today. The US tax code is outdated and is putting global US-based companies at a disadvantage to foreign competitors in an area of critical importance, specifically investing in the US. Comprehensive tax reform is essential to create competitiveness and to stimulate investment in the economy.'

AbbVie has agreed to pay Shire the break fee of approximately US$1.64bn.

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