Shire share price crashes as AbbVie board reconsiders merger

on Oct 15, 2014
Updated: Oct 21, 2019

**AstraZeneca, Smith & Nephew suffer significant falls**, Wednesday, October 15: Shares in Shire (LON:SHP) have slumped more than 26 percent in early trading this morning, dragging other London-listed pharma groups lower, after AbbVie (NYSE:ABBV) said that it was reconsidering its merger proposal.
As of 08:57 BST, Shire’s share price had lost 26.13 percent to 3,797.00p after having shed more than 28 percent at the opening bell. The drop is also pressuring the benchmark FTSE 100 index which currently stands 1.11 percent lower at 6,322.00 points, underperforming European peers. The news is weighing on AstraZeneca (LON:AZN) and Smith & Nephew (LON:SN) whose shares have lost 3.88 percent and 3.80 percent, respectively.

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**AbbVie board reconsiders merger**
AbbVie announced in a statement yesterday that it had notified Shire that it intended to reconsider its £32 billion merger recommendation. The US company explained that its board would consider the impact of the tax regulation changes proposed by the US Treasury, including their “impact to the fundamental financial benefits of the transaction”.

“At this time, AbbVie’s board of directors has not withdrawn or modified its recommendation to AbbVie stockholders,” the US group noted in the statement, adding that its board planned to meet on October 20 to consider whether to withdraw or modify its recommendation on the deal with Shire.
AbbVie decision to reconsider the deal comes after last month, the US Treasury and the Internal Revenue Service issued a notice concerning targeted action for reducing the tax benefits of corporate tax inversions and, when possible, stopping the deals altogether, with the news sending Shire’s share price plunging more than six percent in London. ()

Tax considerations are one of the primary reasons for AbbVie’s interest in Shire, with the US group expecting the tie-up to reduce the combined company’s effective tax rate to approximately 13 percent from 22 percent, with New AbbVie taking Shire’s UK tax domicile.

**Break fee**
Shire issued a statement to the London Stock Exchange this morning, saying that it had not been provided with a detailed analysis of AbbVie’s tax assumptions and that the US group’s notice did not quantify the anticipated financial impact of the US Treasury measures on the tie-up.
“The Board of Shire believes that AbbVie should proceed with the recommended offer on the agreed terms in accordance with the Cooperation Agreement,” Shire said in the statement, adding that it would meet to consider the situation.
The FTSE 100 company, however, warned that if AbbVie changed its merger recommendation, and shareholder approval was not obtained, it would have to pay a break fee of about $1.64 billion (£1 billion) to Shire.
**On Tuesday, October 15, buy Shire shares at 5,155.00p.**
**On Tuesday, October 15, sell Shire shares at 5,145.00p.**


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