Business

AbbVie and Shire call off deal after US tax rule change

Shire building Image copyright Reuters
Image caption The proposed takeover would have shifted AbbVie's headquarters to the UK, where tax rates are lower

US firm AbbVie announced it has abandoned its talks with UK drugmaker Shire for a £32bn takeover.

The decision came after a new US rule discouraging corporate mergers that would lower a US firm's tax rate, known as "inversions".

The merged firms' base would have shifted to the UK isle of Jersey, where corporate taxes are lower.

The US rule introduced an "unacceptable level of risk and uncertainty" said AbbVie in a statement.

Last week, AbbVie's board withdrew its support for the proposed takeover in the wake of the introduction of the rule, which was published by the US Treasury on 22 September.

In a statement, AbbVie's leadership said that without the support of the board, it was unlikely that shareholders would approve of the transaction.

'US companies disadvantaged'

The firm's chief executive, Richard A. Gonzalez, lashed out against the efforts by the US government to discourage such mergers.

"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," he said.

"The US tax code is outdated and is putting global US-based companies at a disadvantage to foreign competitors in an area of critical importance, specifically investing in the United States."

AbbVie will pay a $1.64bn (£990m) breakup fee as a result of the failed merger effort.

Earlier this month, Salix Pharmaceuticals scrapped its merger with the subsidiary of an Italian drugs firm in the wake of the new US tax regulations.

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