AbbVie, Shire "Break Up" As Result Of New Tax Inversion Rules
By Lori Clapper
AbbVie has pulled the plug on its deal to buy out U.K.-based drug maker Shire this week, in the wake of new rules the U.S. government plans to implement to govern overseas acquisitions. The proposed acquisition has been described by Bloomberg as the “biggest U.S. tax inversion” to date, as AbbVie was set to purchase Shire for $52 billion and move its headquarters to the U.K. in the name of lower taxes.
However, the tweaks to tax inversion laws "reinterpreted long-standing tax principles in a uniquely selective manner designed specifically to destroy the financial benefits of these types of transactions," AbbVie said in a company statement on Monday.
Now with the deal dead in the water, AbbVie will take the next several years to pay Shire a $5 billion share buyback. It also increased its quarterly dividend to 49 cents per share, an increase of 17 percent, Bloomberg reported.
Bill Smead, chief executive of Smead Capital Management commented that AbbVie’s "challenge now is in two years they lose their patent on one of the biggest blockbusters of all time, and they'll have to replace that," in regards to AbbVie’s blockbuster drug Humira.
The acquisition would have expanded AbbVie's drug portfolio because it would have gained Shire's pipeline of therapies for attention deficit hyperactivity disorder.
In light of AbbVie’s decision to end the deal, Shire said it was still "well-positioned to focus on the company's previously announced growth strategy.”
Shire Chairwoman Susan Kilsby added that although the company was disappointed that the offer fell through, “we continue to enjoy excellent prospects as we execute our plan to double Shire's product sales to $10 billion by 2020.”
“We recognize that without a transaction the size of Shire, our cash position will build quickly, it has always been our commitment to return cash to shareholders,” Richard Gonzalez, AbbVie’s chief executive officer told the Los Angeles Times.