With taxes in mind, AbbVie says it might not buy Shire

With its share price plunging on stock exchanges in London and New York, drugmaker Shire on Wednesday afternoon waived a technical requirement of its pending agreement with AbbVie in hope that the Chicago company will more quickly rethink its decision Tuesday night to "reconsider" its $54 billion acquisition of Shire.

"In order to allow the period of uncertainty for its shareholders, employees, and other stakeholders to be reduced," Shire said in a statement Wednesday, it will waive a requirement that at least three business days must pass before the AbbVie board meets to consider the deal.

But AbbVie is doing just that, with its board scheduled to meet Monday, amid market reports and speculation that the deal will be scrapped. If the deal is changed significantly - which remains possible - or collapses, it would be a victory for the Treasury Department. In September, Treasury Secretary Jack Lew announced new rules to deter U.S. companies from buying foreign companies to avoid paying higher U.S. corporate taxes.

These so-called tax inversion deals have different forms, but basically involve the U.S. company buying a foreign firm, then registering its headquarters in the other country, even though most of the top executives and staff remain in the United States.

"These firms are attempting to avoid paying taxes here, notwithstanding the benefits they gain from being located in the United States," Lew wrote in a letter to U.S. senators.

AbbVie gets 60 percent of its revenue from one arthritis drug, Humira, so it hoped Shire's attention deficit hyperactivity disorder medicines would diversify its product list, but the tax benefits were clearly the driver. Based in North Chicago, Ill., AbbVie said Tuesday night the new Treasury rules force its board to consider the "impact to the fundamental financial benefits of the transaction."

Shire's headquarters is in Dublin, Ireland, which is also closing tax loopholes, but Shire has a bit more than 1,000 employees and 300 contractors in Chesterbrook and other U.S. sites. Shire's first statement early Wednesday expressed surprise, urged the AbbVie board to complete the deal, and noted that it would be owed $1.63 billion if AbbVie backs out.

Shire's stock is traded in London. Its American depository shares, which are traded on the Nasdaq Stock Exchange, closed down 30.29 percent Wednesday, finishing at $170.50. AbbVie's shares closed down less than 1 percent at $54.57.

Regular investors weren't the only losers when the Shire price dropped Wednesday. The Wall Street Journal reported that the top 10 hedge-fund holders of Shire shares had more than $9 billion riding on the deal's being completed. John Paulson, who gained fame and wealth betting against the housing market nearly a decade ago, was among those hedge-fund leaders.

"We believe this transaction creates enormous value for AbbVie shareholders," Paulson said in a statement. "The combination is both strategic and accretive regardless of the tax considerations. As a large AbbVie shareholder we hope the AbbVie board reaffirms its commitment to the transaction after its review."