Shares in pharmaceutical firm Shire have plunged after U.S. suitor AbbVie said it might rethink its $55 billion takeover following a change to U.S. regulations. As Hayley Platt reports it's the first sign the new rules which curb the tax benefits of such tie-ups are having an impact.
It was on course to become one of the biggest deals ever in the pharmaceutical industry. But a change in U.S. tax regulations is making America's AbbVie reconsider its $55 bln bid for Shire. The news was a bitter pill for the UK drugmaker - its shares fell 27% percent wiping almost $13 billion off the stock price Both companies stood to benefit from so-called 'tax inversion' laws which allowed U.S.-listed holding companies to create a tax domicile in Britain. But last month the U.S. government unveiled measures to make the practice less attractive. Darren Sinden is from Admiral Markets. SOUNDBITE: Darren Sinden, Admiral Markets UK, saying (English): "Obviously there is some commercial synergy between AbbVie and Shire but I'm fairly certain that the tax benefits were the thing that swung it. If there was any question of it being a marginal deal without that, then I don't think it goes ahead." AbbVie wanted Shire to help them become less reliant on Humira, the world's top selling drug. It treats a range of illnesses and generates nearly 60 percent of the drugmakers revenues. But its U.S. patent protection runs out in 2016. Quentin Webb is from Reuters Breakingviews. SOUNDBITE: Quentin Webb, Associate Editor, Reuters Breakingviews, saying (English): "It looks like a lot of the benefit in AbbVie buying Shire was tax based. But earlier on they said that there was a lot of compelling strategic logic to a deal to but as the U.S. opposition has hardened they seems to have changed stance on that." AbbVie will meet next week to decide for sure whether it's pulling out. And there could be some small comfort for Shire - it stands to receive 1.7 billion dollars in compensation if the deal doesn't proceed - much of which could be distributed to shareholders.