AbbVie is reconsidering its acquisition of Shire Pharmaceuticals after the United States Treasury Department announced it would crack down on tax inversions.
The U.S.-based drug maker planned to incorporate a new company on the island of Jersey, where Shire is based. That would allow the combined companies to pay lower corporate taxes.
AbbVie’s board of directors intends to meet next week to consider whether to withdraw or modify its recommendation that shareholders approve the deal.
Shire’s stock dropped 22% on Wednesday morning as a result of the announcement.
The company believes that AbbVie should proceed with the recommended offer or pay a large breakup fee.
“The board of Shire notes that, in the event that the AbbVie board adversely changes its recommendation and AbbVie stockholder approval is not obtained (or another triggering event occurs), a break fee of approximately $1.635 billion would be payable by AbbVie to Shire,” says a company statment.
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