Shire shares slump as US looks to deter tax inversion deals
Shire, the pharmaceutical group that has agreed to a £32bn takeover by Abbvie, saw its share price sink sharply on Wednesday on concerns that stricter rules on so-called 'tax inversion' in the States could scupper the deal.
The US Treasury Department said it was looking at ways to deter American companies from looking to shift their tax domicile overseas by taking over foreign businesses.
A Treasury spokeswoman said the department was "reviewing a broad range of authorities for possible administrative action that could limit the ability of companies to engage in inversions, as well as approaches that could meaningfully reduce the tax benefits after inversions take place".
US drugstore chain Walgreens, which announced on Wednesday that it would pay £6bn to buy up the remaining 55% of Alliance Boots, gave up its chance to save billions in taxes.
It said it would keep its tax base in the States, instead of relocating to Switzerland where Boots is based, with reports suggesting that the rationale behind the decision was political pressure.
UK pharma group Astrazeneca, which had recently been the target of a failed £69bn bid from Pfizer, saw its share price also droop on Wednesday as hopes eased that the US giant could return later in the future with a higher offer.
Pfizer was explicit earlier in the year that it was looking to acquire to Astrazeneca to lower its tax bill.
Concerns among investors were also exacerbated further after the collapse of two multi billion-dollar deals in other sectors, raising fears about a cooling of the M&A market.
21st Century Fox announced plans to walk away from the near-$80bn takeover of Time Warner and Sprint shelved plans to buy T-Mobile US for $30bn.
"Sentiment was further hurt after deals worth more than $100bn were pulled off the table last night in the US, with analysts questioning the robustness of the recent M&A boom," said market strategist Daniel Sugarman from ETX Capital.
BC