AbbVie Flees U.S. Tax Burden With $54B Shire Deal

Filippo Monteforte/AFP/Getty Images

Filippo Monteforte/AFP/Getty Images

It’s a familiar story; American drugmakers are looking to reduce their tax burdens by staking out new headquarters abroad, as was perhaps epitomized by Pfizer’s drawn-out pursuit of AstraZeneca, mere months ago now. The next target? Shire plc (NASDAQ:SHPG), a small drugmaker based in the U.K. and known primarily for manufacturing Adderall, a treatment for attention deficit disorder. The deal is taking place even as U.S. lawmakers continue to demand a crack-down in order to prevent companies from escaping their tax liabilities.

Had Pfizer’s takeover of AstraZeneca succeeded, it would have been the biggest pharmaceutical merger of the year; now it looks like that title may go to AbbVie Inc. (NYSE:ABBV) and Shire, which have together reached an agreement, according to reports from various news sources.

AbbVie’s potential acquisition of Shire is worth a whopping $53 billion, according to sources who spoke with the New York Times on Thursday. AbbVie hopes to reincorporate in Britain following the close of the deal, in order to realize the tax benefits associated with Europe, which continues to boast a much lower corporate tax rate than the U.S.

“We expect the majority of tax savings to be realized within the first two years,” analysts at Barlcays told Reuters recently.

But although AbbVie may have been drawn in by the potential for tax savings, there are profound strategic benefits to the merger for both companies as well; unlike Pfizer and AstraZeneca, this is not an odd couple. “This transaction is a combination of two leading companies with leadership positions in specialty pharmaceuticals that would create a global market leader with unique characteristics and a compelling investment thesis,” said AbbVie’s chief executive Richard A. Gonzalez in a recent statement, per the New York Times.