AbbVie and Shire terminate $55 billion merger proposal

North Chicago, IllinoisWednesday, October 22, 2014, 09:00 Hrs  [IST]

AbbVie Inc. and Shire plc have agreed to terminate their proposed merger deal of US$ 55 billion following the decision by AbbVie's Board to withdraw support for the proposed transaction. The decision was based upon its assessment of the September 22, 2014 notice issued by the US Department of Treasury, which re-interpreted longstanding tax principles in a uniquely selective manner designed specifically to destroy the financial benefits of these types of transactions. The notice introduced an unacceptable level of risk and uncertainty given the magnitude of the proposed changes and the stated intention of the Department of Treasury to continue to revise tax principles to further impact such transactions. AbbVie has agreed to pay Shire the break fee of app. US$ 1.64 billion.

The company conducted a through review of the September 22, 2014 notice to explore available options to preserve the transaction. This review included the advice of external tax, legal, and financial advisors in both the US and the UK. The executive management team ultimately concluded that the transaction was no longer in the best interests of stockholders at the agreed upon valuation, and the Board fully supported that conclusion.

Richard A Gonzalez, chairman and CEO of Abb Vie, said, “AbbVie has built a strong, sustainable strategy with a robust pipeline. Over the past 22 months we have delivered industry leading stockholder returns, our performance and business fundamentals remain strong, and we are on the cusp of major new product launch with our treatment for HCV. We remain focused on building AbbVie's business through enhanced internal R&D platforms, partnerships, strong commercial execution and licensing and acquisition.”

“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. The US tax code is outdated and is putting global US-based companies at a disadvantage to foreign competitors in an area of critical importance, specifically investing in the US. Comprehensive tax reform is essential to create competitiveness and to stimulate investment in the economy.”