US biopharmaceutical firm, AbbVie has agreed to buy rival group, Shire for almost $55bn (€41bn), becoming the latest American healthcare company to shift its tax residence abroad in a record surge in industry deals.
Its new tax domicile will, however, be Britain and not Ireland, where Shire shifted its headquarters to six years ago in order to avoid paying tax on royalty earnings in the UK.
Shire shareholders will receive cash and stock valued at £52.48 a share, the companies said in a statement yesterday. The price is 53% above Shire’s closing level on May 2, before AbbVie made its first proposal to buy the company. The deal caps the Chicago company's two and a half-month pursuit of Shire.
The agreement will move AbbVie’s tax residence, though not its management, to the UK in a so-called tax inversion, dropping the company’s tax rate to 13% from 22%. Shire’s treatments for attention deficit hyperactivity disorder and rare diseases will diversify AbbVie’s portfolio, which is dominated by a single drug, the arthritis medicine Humira.
AbbVie chief executive, Richard Gonzalez and his executive team won’t move out of the US. While Shire is based in Dublin for tax purposes, its main executive offices are in Basingstoke, and its CEO, Flemming Ornskov works in Lexington, Massachusetts. AbbVie has said the combined company's tax domicile will be in the UK.
AbbVie will gain a series of rare disease drugs and experimental products, one of which — Premiplex for a potentially blinding eye disorder in infants — could generate more than $1bn annually if it reaches the market.
AbbVie’s bid for Shire is the latest merger in a period of increased acquisition activity in the drug and medical-device industry. Not including this one, there were deals proposed or completed worth $264bn in the second quarter, five times more than any quarter since at least 2009.
The US government has been scrutinising tax inversions, and Senator Ron Wyden, is proposing a bill that would make them more difficult to do. Shire yesterday reported record second quarter figures, with revenues up 20% year-on-year to $1.5bn.
* Bloomberg; additional reporting Irish Examiner
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