Miracle Cure: AbbVie Buys Shire Plc
Miracle Cure: AbbVie Buys Shire Plc
US drugmaker AbbVie Inc just purchased Dublin-based Shire Plc for 32 billion pounds deal that will allow it to slash the tax bill through relocation to Britain. With hopes of a tax reprieve AbbVie has been chasing Shire Plc for some time now.
The US firm has raised its price to 5248 pounds per share. This is made of 24.44 pounds in cash and 0.8960 new AbbVie shares. Chicago-based firm AbbVie is purchasing Shire to cut the US tax bill. It relies on an arthritis drug called Humira which is the top selling medicine in the world for this affliction currently. However, AbbVie which derives nearly 60% of its revenue from this drug will lose US patent protection in the year 2016.
A firm offer has been placed for Shire nearly 4 times now. This was the final offer Shire could receive from the US firm which otherwise had the choice of extending th deadline or walking away under UK takeover rules. The US firm is now creating a company listed in New York which will be incorporated in Jersey and the Channel Islands. It is going to have its tax domicile in Britain now.
Effective tax will be paid for an amount of around 13% by the year 2016 which is much more lower than its current rate of about 22%. Clearly, Shire is the miracle cure AbbVie is looking for to use tax inversion to its advantage. This is one of the largest deals driven by the tax inversion tactic.
Pfizer Inc in America earlier tried to play the same card when they bid for British firm AstraZeneca for a sum of $118 billion deal. However, where Pfizer Inc failed, AbbVie has succeeded. The voice against tax inversion deals such as these is growing louder in the US.
US Treasury Secretary Jacob Lew has been urging the Congress to prevent such deals and promote “economic patriotism”. But when it comes to money, divided loyalties are bound to arise. Perhaps economic incentives are needed to boost economic patriotism.
The use of taxpayer-supported research to prop up company fortunes and then moving onto greener pastures has also been criticised by Dick Durbin from the US Senate. AbbView is attracting its share of brickbats even when its on its way to become a really profitable company. Measuring company success through profits is finding its share of critics.
Durbin, a senator from Illinois is also protesting how the government’s patent office protected the firm from making losses and the company has responded by rushing off to an Irish island to avoid taxes.
AbbVie's Chairman and CEO Richard Gonzalez emphasised the need for tax reforms instead. Shire has been targeted with a lengthy wooing process and AbbVie has succeeded in filling the gaps when it comes to making a perfect offer. The perfect deal has been sealed and AbbVie is now ready to gain freedom from the persistent US taxman. All that now remains is to convince the US senators. AbbVie would need another miracle to achieve this, by the looks of it.
