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NORTH CHICAGO, Ill., and DUBLIN, Ireland — Drug makers AbbVie Inc. and Shire plc have canceled their proposed $54 billion merger agreement.
The companies said late Monday that the decision to kill the deal, which was announced in mid-July, came after AbbVie’s board late last week withdrew its recommendation of its offer to acquire Dublin-based Shire.
AbbVie noted that the board’s decision stemmed from a Sept. 22 notice by the U.S. Treasury Department that tightened regulations on inversions. Under the controversial practice, a U.S.-based business acquires or merges with a foreign company and is domiciled overseas but keeps its operations in the United States, in turn realizing significant tax benefits.
According to AbbVie, the Treasury Department’s 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."
Richard Gonzalez, chairman and chief executive officer of AbbVie, criticized the Treasury Department’s move.
"The unprecedented unilateral action by the U.S. Department of Treasury may have destroyed the value in this transaction, but it does not resolve a critical issue facing American businesses today," Gonzalez said in a statement. "The U.S. tax code is outdated and is putting global U.S.-based companies at a disadvantage to foreign competitors in an area of critical importance, specifically investing in the United States. Comprehensive tax reform is essential to create competitiveness and to stimulate investment in the economy."
In withdrawing its offer, AbbVie agreed to pay Shire a break fee of $1.635 billion.
"Whilst we are disappointed that the offer will not now complete," Shire chairman Susan Kilsby stated, "we continue to enjoy excellent prospects as we execute our plan to double Shire’s product sales to $10 billion by 2020."
Shortly after announcing the termination of the Shire deal, AbbVie said its board has authorized a new $5 billion stock repurchase program and raised the company’s quarterly cash dividend by nearly 17%.
