AbbVie, Shire agree to $54.6 billion merger to slash corporate tax rate
- AbbVie will pay roughly $89.64 per share of Shire, which breaks down to $41.71 in cash and .896 new shares of AbbVie.
- Shire shareholders will have a 25% stake in the new company.
- There will be significant tax advantages associated with this deal, with a tax rate of 13% by 2016 -- a significant drop from its current 22% tax rate.
This deal represents a premium of 53% above Shire's stock price on May 2, when the deal was initially proposed. The new company will incorporated on the British island of Jersey. According to Richard Gonzalez, AbbVie chief executive, “We’re creating a unique, diversified biopharmaceutical company which will benefit from a best-in-class product development platform, a stronger pipeline and more enhanced R&D capabilities.”
Multi-national U.S. companies -- and especially health care companies -- have increasingly turned to tax-inversion mergers in an effort to avoid high American corporate tax rates which, at an average of 35%, are the highest in the world. But inversions have drawn scrutiny from President Barack Obama and members of Congress in recent years since the deals usually go hand-in-hand with a loss in U.S. tax revenue. American medical device maker Medtronic announced that it would pursue an inversion deal in Ireland last month, and pharmacy giant Walgreens is contemplating a similar deal in Switzerland.
- Pharma Times AbbVie and Shire agree £32 billion merger