AbbVie to reconsider its $54 billion deal of July to buy Shire

North Chicago based company AbbVie Inc. on Tuesday announced that now in the light of new Treasury rules announced on September 22, AbbVie has plans to reconsider its merger of $54 billion deal of July to buy Shire a Dublin based Pharmaceutical Company & establishes its tax headquarters in the U.K.

AbbVie Chief Executive Richard Gonzalez said in that AbbVie didn’t go for the merger plans with Shire “just for the tax impact.” But as per some analysts views the tax change was the main nearest term financial benefit of the acquisition. If in case the AbbVie board & its shareholders changes its recommendation on the deal, then AbbVie has to owe Shire 3% of the deal’s value which will be around a $1.6 billion of breakup fee.

And on Wednesday Shire said that AbbVie have to proceed with the deal based on the agreed terms of the two companies & further to handle the situation the Shire board will meet.

On September 22, after Treasury Secretary Jack Lew has announced tax rules this deal of AbbVie with Shire appears less lucrative. And from AbbVie’s Tuesday’s statement its clear that company’s board would reconsider the impact of tax rules over other things.

“AbbVie’s Board will consider, among other things, the impact of the U.S. Department of Treasury’s proposed unilateral changes to the tax regulations announced on September 22, 2014, including the impact to the fundamental financial benefits of the transaction,” the statement said. And AbbVie spokeswoman declined further comment.

AbbVie’s half of its revenue comes from its best selling Drug Humira, a rheumatoid arthritis injection. And further AbbVie is developing a hepatitis C pill to compete with Gilead Science’s Sovaldi.

While the tax rule changes make the planned merger less attractive, “we believe that AbbVie could argue that the rules should not apply to it because the merger was based on other strategic priorities, such as diversifying the business from Humira or improving its pipeline in attractive specialty markets, and that it is not fair for the Treasury to change the rules after the deal has been announced,” Alex Arfaei, an analyst with BMO Capital Markets, wrote last month in a report. “Moreover, it is not clear to what extent AbbVie’s expected tax savings after inversion would be impacted by the tactics outlined by the Treasury.”

AbbVie’s stock on Tuesday night was down by 2.09 % in afterhours trading. And as per Researchers of Joint Committee on Taxation, it’s estimated that the U.S. Treasury has a loss of around $20 billion due to these inversions.