More than £8bn was slashed off the stock market value of Shire after US suitor AbbVie said it was reconsidering its £34bn takeover of the UK drug company.
The deal could become the biggest to be wrecked by the White House’s clampdown on tax inversions.
Shares in Shire crashed 28%, or £14.40, to £36.90, making it the biggest faller on the FTSE 100 index. Shares in AstraZeneca, also a takeover target, fell 3.6% while Smith & Nephew slid 2.6%.
AbbVie said its board would meet next Monday to reconsider the recommendation made to shareholders in July to vote for the merger agreement, which would have created one of the largest pharmaceutical companies in the world. AbbVie had planned to shift its tax base from the US to Britain as part of the deal to cut its corporation tax rate to 13%, from 22%, by 2016.
Last month US Treasury officials unveiled new rules to make it harder for American companies to complete tax inversion deals.
AbbVie will have to pay a big break fee to Shire if its board decides to walk away from the deal – £960m (equivalent to 3% of the value of the deal).
Shire said it was notified overnight by AbbVie of its plans to withdraw or modify its recommendation, but said the US company had not quantified the anticipated financial impact of the clampdown on tax inversions.
“The board of Shire believes that AbbVie should proceed with the recommended offer on the agreed terms in accordance with the cooperation agreement,” the UK company said. Its board will meet to discuss the situation.
Shire executives, led by the chief executive, Flemming Ornskov, would net £19m in retention payments if the deal went ahead.
Other US companies looking to redomicile abroad to make huge tax savings include Pfizer, whose £69bn attempt to buy AstraZeneca failed in May. The Viagra maker could come back with a new bid late next month after a six-month cooling-off period expires.
Shire is scheduled to publish third-quarter results next Friday. Following record quarterly revenues in the second quarter, trading has remained strong, it said.
