AbbVie, Shire call off deal over US tax rule change

AbbVie and Shire agreed to terminate what would have been the biggest US tax inversion after AbbVie pulled its support for the deal in the wake of proposed changes to US rules governing such transactions.

AbbVie, based in North Chicago, Illinois, planned to buy Shire for an estimated $52 billion (€40.8bn), then move the combined company’s legal address to the UK to lower its tax bill and access cash trapped overseas.

After confirming the deal was dead, the drugmaker announced a $5bn share buyback over the next few years and increased its quarterly dividend by 17% to 49 cents per share.

“We recognise 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, said in a conference call following the announcements.

The deal is the largest casualty yet of rules announced last month by the US Treasury Department to make tax inversion deals more difficult.

The new rules “reinterpreted longstanding tax principles in a uniquely selective manner designed specifically to destroy the financial benefits of these types of transactions,” AbbVie said late yesterday in a statement.

AbbVie said it will pay Shire a breakup fee of $1.64bn.

Shire is based in Ireland for tax purposes, but has executive offices in Basingstoke, England.

Shire said it remains “well-positioned” to deliver on the company’s previously announced growth strategy of doubling annual product sales to $10bn by 2020.