Shire share price: Board in crisis talks as AbbVie drops merger

on Oct 17, 2014
Updated: Oct 21, 2019
Listen, Friday, October 17: Shire Plc (LON:SHP) executives held an emergency meeting yesterday after AbbVie (NYSE:ABBV) decided to drop its merger with the London-listed group, The Times has reported.

Shire’s share price, which slumped more than 20 percent on Wednesday, declined further in yesterday’s trading, shedding 7.33 percent to close at 3,718p. The company’s shares, however, recovered on the NASDAQ yesterday, closing 4.67 percent higher at $178.46.
**Crisis talks**
The Times reported that Shire directors were locked in an emergency board meeting yesterday after the American drugmaker pulled out of the merger unveiled in July.

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AbbVie this week withdrew its recommendation for a £32 billion tie-up in the wake of the Obama administration’s move to clamp down on tax inversion deals. () The merger would have seen the combined company take up Shire’s UK tax domicile, with AbbVie expecting a reduction in the merged entity’s effective tax rate to approximately 13 percent from 22 percent.

Shire said in a short statement to the London Stock Exchange yesterday that the company board was considering the current situation with a further announcement to be made in due course.
The FTSE 100 group could insist that a shareholder vote is held, but AbbVie shareholders are unlikely to approve a merger without the support of the company board. Shire could decide to end the co-operation agreement between the two companies, triggering a break fee payment from AbbVie of about $1.64 billion (£1 billion). The Telegraph has quoted Dealogic as estimating that the break fee is the third largest ever on record and the biggest since US telecom AT&T’s failed T-Mobile USA bid.

**AbbVie considerations**
The Times quoted banking sources as explaining that without the tax advantages and the threat of further tax changes, AbbVie was concerned that it was overpaying for Shire.

The US group commented in yesterday’s statement that the tax changes had “eliminated certain of the financial benefits of the transaction”.

“This fundamentally changed the implied valued of Shire to AbbVie in a significant manner,” the North Chicago-based group pointed out.
Unidentified sources told The Telegraph that AbbVie and its team of lawyers had also grown increasingly cautious that Washington could take further action over the US tax rule which would impact the deal.
**Analysts on Shire**
As of October 16, the consensus forecast amongst 32 polled investment analysts covering Shire for the Financial Times has it that the company will outperform the market.
Analyst Ratings Network reports that the FTSE 100 drugmaker currently has a consensus ‘buy’ rating and an average price target of 3,910.05p.
Shire is due to release its third-quarter results statement on October 24.
**On Thursday, October 16, buy Shire shares at 3718.00p.**
**On Thursday, October 16, sell Shire shares at 3716.00p.**


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