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Biotechnology Stockmarket Biotech

AbbVie Inc (ABBV) has announced that it jointly agreed with Shire plc (SHPG) to terminate the planned acquisition of the latter, which was due to be completed by year end. We remind investors that in Jul 2014, AbbVie had agreed to acquire Shire for approximately £53.19 per Shire share (£24.44 in cash and 0.8960 ordinary shares of the merged company for each Shire share). The deal was valued at approximately £32 billion.

AbbVie decided to terminate the proposed transaction following a thorough review of a notice issued by the U.S. Department of Treasury on Sep 22, 2014 related to the longstanding tax principles associated with tax inversion deals.

AbbVie said that the manner in which the U.S. Treasury re-interpreted the tax principles has increased the level of risk and uncertainty that might potentially mitigate the financial benefits associated with such transactions. With the termination of the deal, AbbVie will be making a break-up fee payment of approximately $1.635 billion to Shire.

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Along with calling off the Shire acquisition, AbbVie said that it will be buying back shares worth $5 billion and increasing its quarterly cash dividend by nearly 17%.

Although AbbVie had not intended to acquire Shire solely for tax reduction purposes, it was a major incentive behind the agreement. The deal would have reduced AbbVie’s effective tax rate to approximately 13% by 2016 from the current effective tax rate.

With the termination of the proposed acquisition, AbbVie has forgone the chance to add several multi-million dollar generating products to its portfolio.

Biotech Financial News

With the termination of the deal, AbbVie will have to pay a breakup fee of $1.635 billion. Although the company announced a $5 billion share buyback plan and boosted its dividend, AbbVie remains highly dependent on Humira for growth. While the pipeline should start delivering, quite a few companies are working on developing biosimilar versions of Humira.

Thanks for visiting the TechNews.org website. Be sure to catch all BioTech financial news, Buy Phentermine 37.5 and check all the videos and news articles regarding Biotech business news.

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