AbbVie and Shire scrap $52bn tie-up

US pharmaceutical AbbVie has announced that it has called off the $52bn purchase of Irish-based company Shire that it had proposed.

This means AbbVie will have to surrender a $1.64bn break-up fee to Shire for not following through with the deal.

The drugmaker has blamed regulation changes set in motion by the US Treasury Department for the dissolution of the agreement.

New rules intend to prevent US firms from shifting overseas to utilise lower tax rates.

AbbVie argued that the new regulation changes have “re-interpreted longstanding tax principles in a uniquely selective manner designed specifically to destroy the financial benefits of these types of transactions”.

The company’s chief executive officer (CEO) added: “The unprecedented unilateral action by the US Department of Treasury may have destroyed the value in this transaction, but it does not resolve a critical issue facing American businesses today.”

“The US tax code is outdated and is putting global US-based companies at a disadvantage to foreign competitors in an area of critical importance, specifically investing in the US.”

In compliance with the UK Takeover Code, unless AbbVie gets consent from the UK Takeover Panel, it cannot announce another offer for Shire within 12 months from the date of today’s announcement.

Apart from the apparent tax benefits, this merger would have provided the pharmaceutical with a variety of Shire’s speciality drugs and lucrative medications.

AbbVie has also announced a £5bn stock repurchase program and increased quarterly cash dividend by almost 17% to 49 cents a share.