AbbVie officially abandons proposed Shire takeover

AbbVie and Shire announced Monday that the companies agreed to terminate their planned merger following a recent decision by the US drugmaker's board to withdraw support for the deal. The move triggers a payment of $1.6 billion from AbbVie to Shire, with the break-up fee being Shire's "sole and exclusive remedy for all losses and damages in connection with the transaction." The companies also noted that under UK takeover rules, AbbVie cannot make a fresh offer for Shire for at least 12 months without prior approval of the UK Takeover Panel.

AbbVie reiterated that the decision to terminate the agreement was prompted by recent changes to the US tax code designed to curb tax-inversion agreements. The company said the US Treasury Department "re-interpreted longstanding tax principles in a uniquely selective manner designed specifically to destroy the financial benefits of these types of transactions." People familiar with the matter said AbbVie was also concerned about future modifications to the rules, given that the Treasury has indicated it would "continue to review a broad range of authorities for further anti-inversion measures," and also "continue to examine ways to reduce the tax benefits of inversions, including through additional regulatory guidance."

However, CEO Richard Gonzalez stated the revised rules do not "resolve a critical issue facing American businesses today," adding that "the US tax code is outdated and is putting global US-based companies at a disadvantage to foreign competitors." He added that "we remain focused on building AbbVie's business through enhanced internal R&D platforms, partnerships, strong commercial execution and licensing and acquisitions." After confirming that the deal was terminated, AbbVie separately announced it would increase its quarterly dividend by nearly 17 percent and authorise a $5-billion stock -repurchase programme.

Meanwhile, Shire conceded that once AbbVie's board decided to withdraw its support for the transaction, there was "no realistic prospect" that investors would approve the merger. The Irish drugmaker added that it had agreed to terminate the deal because it was in the best interests of its shareholders and employees "to resolve the situation as quickly as possible." Shire chairman Susan Kilsby remarked that "whilst we are disappointed that the offer will not now complete, we continue to enjoy excellent prospects as we execute our plan to double Shire's product sales to $10 billion by 2020."

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