21st Oct 2014 05:40
SAINT HELIER (Alliance News) - US drug maker AbbVie, Inc agreed Monday to terminate its proposed merger with Irish drug company Shire PLC after its board withdrew support and recommendation for the deal. The move comes amid the proposed changes in tax rules in the US.
AbbVie also announced a new USD5 billion stock repurchase program and Increased quarterly cash dividend by nearly 17%.
AbbVie's decision to change the recommendation was based upon its assessment of the September 22 notice issued by the US Department of Treasury, which re-interpreted longstanding tax principles in a uniquely selective manner designed specifically to destroy the financial benefits of these types of transactions.
"The unprecedented unilateral action by the US Department of Treasury may have destroyed the value in this transaction, but it does not resolve a critical issue facing American businesses today. The US tax code is outdated and is putting global US-based companies at a disadvantage to foreign competitors in an area of critical importance, specifically investing in the US," AbbVie's Chairman and CEO Richard Gonzalez said in a statement.
The US regulators have proposed to reverse all such so called tax inversion deals, which enable companies to redomicile in Ireland, Canada, Switzerland or other countries that have much lower corporate tax rates than the US, which are among the highest in the developed world.
Congressional Democrats have already submitted legislation aimed at curbing US companies from doing inversions. Under the proposal, companies that carry out certain types of inversions after May 8, 2014 would remain US corporations for tax purposes. This is aimed at halting the wave of such deals in recent times.
The executive management team of AbbVie finally concluded that the merger was no longer in the best interests of stockholders at the agreed upon valuation, and the board fully supported the conclusion.
As per the terms of the deal, AbbVie has agreed to pay Shire the break fee of about USD1.635 billion as a remedy for all losses and damages in connection with the transaction.
Under the UK Takeover Code, except with consent of the UK Takeover Panel, AbbVie must not, among other things, announce a further offer for Shire within 12 months from the date of this announcement.
AbbVie had on October 14 sent notice to Shire on its intention to withdraw or modify its recommendation for the merger and set a board meeting to discuss it for October 20.
AbbVie agreed in mid-July to a USD54 billion deal to acquire Shire, and recommended its shareholders to adopt the merger agreement. As per the terms of the deal, AbbVie had to provide Shire with three business days' notice of any intention to consider a change in recommendation.
Separately, the AbbVie board authorised a new USD5 billion stock repurchase programme which is expected to be executed over the next several years. The stock repurchase authorisation permits shares to be repurchased in open market or private transactions, has no time limit and may be discontinued at any time.
The AbbVie board also declared a 17% higher quarterly cash dividend of USD0.49 per share, payable on February 13, 2015 to stockholders of record as of January 15, 2015.
Copyright RTT News/dpa-AFX
Related Shares:
Shire