AbbVie Inc (NYSE:ABBV) is said to be considering withdrawing its bid for the acquisition of its UK based competitor Shire PLC (ADR) (NASDAQ:SHPG), citing new tax rules by the U.S. government. The U.S. drug firm had agreed to acquire the UK rival in a $52 billion deal.
AbbVie Inc (NYSE:ABBV) and Shire PLC (ADR) (NASDAQ:SHPG) were to come into a merger and create a new company to be incorporated in Jersey, United Kingdom, according to a deal announced back in June this year. The inversion was going to significantly reduce the company’s tax bill.
The board of the North Chicago, Illinois-based company is set to meet by 20th of this month to deliberate on the effects of the new guidelines and whether to proceed with the deal. The decision to tentatively halt the deal pending board deliberations has caught many AbbVie Inc (NYSE:ABBV) employees and several investors by surprise. The company had last month announced to its employees that the deal would proceed as planned.
“Investor reaction is one of confusion and shock and we hope this will be resolved quickly,” Jeffrey Holford, an analyst at Jefferies LLC in New York, wrote in a report today. “The limited communication from AbbVie is exacerbating the level of concern.”
Since AbbVie Inc (NYSE:ABBV) announced the deal, Shire PLC (ADR) (NASDAQ:SHPG) shares have fared well in the market. The announcement however saw the stock slump 27% Tuesday to the level it was before the takeover deal was unveiled.
This article has been written by Victor Ochieng.