CHICAGO (AP) — The drugmaker AbbVie said Tuesday it is having second thoughts about its deal to combine with British counterpart Shire after the U.S. government created new limitations on the tax benefits of incorporating overseas.
North Chicago, Illinois-based AbbVie Inc. said it notified Shire that its board intends to reconsider the recommendation it made in July that its shareholders back the proposed combination worth roughly $55 billion.
AbbVie said in a statement that it hasn’t called off the deal. But it said its board needs to weigh “the fundamental financial benefits of the transaction” in light of new tax regulations announced by the U.S. Treasury in September. The regulations aim to crack down on U.S. companies shifting their ownership abroad to shirk paying U.S. taxes.
In announcing their deal in July, the two drugmakers said they planned to create a new company incorporated on the British island of Jersey, where Shire is incorporated.
A spokeswoman for Shire PLC said the company had no comment on AbbVie’s Tuesday announcement.
Under a so-called “inversion,” a U.S. business would reincorporate in another country after combining with a foreign company. It would then be possible to lower the U.S. tax rate of the company. Critics, including high-ranking lawmakers, said that inversions create a heavier tax burden for others and they became a hot-button political issue.
Earlier this month, Salix Pharmaceuticals scrapped its merger with the subsidiary of an Italian drugmaker in the wake of the new tax regulations.
Shares in AbbVie, which sells the blockbuster anti-inflammatory drug Humira, slipped $1.13, or 2 percent, to $53 in after-hours trading Tuesday.
Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
