Will AbbVie-Shire Deal Come Together by Deadline?

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July 18 (Bloomberg) -- Naresh Chouhan, head of European pharma research at Liberum Capital, discusses today’s deadline for a deal between AbbVie and Shire and how U.S. tax law is impacting pharmaceutical deals. He speaks with Jonathan Ferro on “On The Move.”


Joining us now to discuss what could be a down to the wire deal is the head of european pharma research.


Are we going to get a deal?

It is very likely we will see an announcement given that shire announced they were happy to sit down and discuss and accept the offer or propose the offer contingent upon a few other details.

The cash component of the deal could go up slightly.

It is very likely -- if it isn't, there will most likely be an extension announced.

Outside of this, you see the incentives for why this takeover is going to happen.

You bring the tax rate down to around 22%, 13%, a fantastic incentive.

Why don't the u.s. do something about this?

In the obama budget, they had tried to change the limit, the threshold to no more than 20% owned by foreign shareholders.

They tried to make that 50%. the entire budget was shut down.

There will be a number of potential tax evasions and a number have already been agreed.

The u.s. treasury spends $20 billion in tax revenues over the next decade.

There is increasing pressure in the u.s. one of the main reasons is because the republicans are unlikely to want this.

They want a complete overhaul of the u.s. tax system, not just on this one part of it.

That is what they are trying to get.

If they agree with democrats on anything, they will not be reelected.

When you look at the chance that we could get some legislation that goes through retroactively, what are the chances these deals will have to be scrapped?

Some of these deals have in their contracts a clause which says if the law changes, there is no penalty for the acquirer to walk away.

That could happen over the next six to 12 months.

Considering how long the u.s. takes.

I think it may be difficult.

When we look at pfizer, they didn't get a deal done.

Are they going to come back for another bite?

I think it is likely they will come back.

They were allowed to make one phone call to astrazeneca.

Just the one.

To the one phone call.

They were allowed to state a new price.

If astrazeneca rejects that price, then pfizer has to wait until november 26 to come back.

If they come back then, it all becomes public.

If astrazeneca rejects, the shareholders will not be happy.

It is 50-50 as to whether or not we see something.

When we look at premiums being paid here, i are you concerned about some of these big deals being overpriced?

The 45% premium for shire, normally the premium is 30%. there is definitely some froth out there particularly in the mid-cap arena.

However, two facets.

One is the tax evasion angle.

The u.s. has cash they went to repatriate.

They are driving up the values of asset prices in europe.

This text has been automatically generated. It may not be 100% accurate.


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