A $55 Billion Tax Inversion Deal Is Officially Dead

The AbbVie-Shire merger is officially dead.

In an announcement on Monday, Illinois-based AbbVie and Shire said that they have terminated their proposed merger after AbbVie’s board reconsidered its support for the deal following a September 22 notice from the US Treasury Department.

The deal was originally structured as a “tax inversion” deal that would have seen AbbVie move its headquarters overseas to avoid paying US taxes on sales made abroad.

In a press release, AbbVie said it, “conducted a thorough review of the September 22, 2014 notice to explore available options to preserve the transaction. This review included the advice of external tax, legal, and financial advisors in both the U.S. and the U.K. The executive management team ultimately concluded that the transaction was no longer in the best interests of stockholders at the agreed upon valuation, and the Board fully supported that conclusion.”

Terminating the deal will require AbbVie to pay Shire a $US1.6 billion break-up fee.

Monday’s announcement comes after the companies last week said they were reconsidering the deal.

Following that news, Shire shares fell more than 25% as the market interpreted the deal as essentially off at that point.

That drop in shares saw John Paulson’s hedge fund take an absolute beating, with Business Insider’s Julia La Roche finding that Paulson likely suffered paper losses in excess of $US700 million after that decline.

In after hours trade on Monday, US-listed shares of Shire were down about 1% while AbbVie shares were fractionally lower.

You can read the full release from AbbVie here ยป

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