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Shire Falls on Concern U.S. May Block Tax Inversions

Shire Plc (SHP) fell in London trading on concern the U.S. may block cross-border deals such as AbbVie Inc.’s (ABBV) planned purchase of the drugmaker in which U.S. companies seek to escape the country’s tax system.

Treasury Secretary Jacob Lew asked Congress to approve tax changes retroactive to May that would stop the transactions, which are known as tax inversions.

Shire dropped 1.6 percent to close at 47.86 pounds. The company said July 14 it’s willing to back AbbVie’s 31.4-billion pound ($53.7 billion) takeover offer and the two companies are in discussions to hammer out an agreement. AbbVie shares fell 0.6 percent to $53.11 as of 12:50 p.m. in New York.

“The news on tax inversion and how it could be backdated is scaring some people off,” said Guillaume van Renterghem, an analyst at UBS AG in London. “Our view is that we don’t think it will be backdated.”

Adelle Infante, a spokeswoman for AbbVie, didn’t immediately respond to an e-mail seeking comment. Shire spokespeople Stephanie Fagan and Ben Atwell also didn’t immediately respond to requests for comment.

“As the speed of inversions increases, this will only fuel bipartisan urgency to stop companies from deserting the U.S.,” Senate Finance Committee Chairman Ron Wyden, a Democrat from Oregon, said in an e-mailed statement today.

Tax Inversion

In discussing terms, Shire may push for a clause requiring AbbVie to stick to the deal even if the tax inversion structure doesn’t work out, van Renterghem said. Another question is which chief executive officer will lead the combined company, he said.

AbbVie’s cash-and-stock bid valued Shire at 53.20 pounds a share when it was announced. The value has dropped to about 51.95 pounds as AbbVie’s stock declined the past three days. Under U.K. takeover rules, AbbVie has until 5 p.m. London time July 18 to make a firm offer for Shire, or it must in most cases walk away for six months. The deadline can be extended with Shire’s agreement.

Shire has its tax domicile in Ireland and its management offices in Basingstoke, England. AbbVie has said the combined company would be domiciled in the U.K. and run from North Chicago, Illinois, where AbbVie is based.

Congressional Democrats have introduced bills that echo the administration’s approach to tax inversions. The measures haven’t advanced because of Republicans’ insistence that any changes be made as part of a broader revamp of the tax code that isn’t likely to happen until 2015 at the earliest.

To contact the reporter on this story: Makiko Kitamura in London at mkitamura1@bloomberg.net

To contact the editors responsible for this story: Phil Serafino at pserafino@bloomberg.net

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