AbbVie Inc.’s share price up, puts an end to its deal with Shire Plc after the change in U.S. tax rules

AbbVie Inc. confirmed that its has agreed on the termination of its deal with Shire Plc, after the companys investors did not back the transaction amid proposed changes to the U.S. rules, which regulate such deals.

The two companies expressed their disappointment in separate statements. As reported by Bloomberg, AbbVie said that the new rules “reinterpreted longstanding tax principles in a uniquely selective manner designed specifically to destroy the financial benefits of these types of transactions”.

On the other hand, Shire said that it saw no way of finalizing the merger after AbbVie recommended to its shareholders not to back the deal, asking them to vote against the transaction after the U.S. rules were changed.

The companies were negotiating over the acquisition, proposed by AbbVie, which offered a price of $52 billion. After finalizing the deal, the combined companys headquarters would have been moved in the U.K., so that it could benefit from the more favorable tax conditions. However, the deal was not completed and AbbVie officially announced a share buyback estimated to $5 billion, which is planned to be carried out over the next several years. The company also said that it boosted its quarterly dividend by 17% to 49 cents per share.

As reported by the Financial Times, the Chairman and Chief Executive Officer of the U.S.-based drug maker, Rick Gonzalez, criticised the “unprecedented unilateral action” by the government and added that it had created an “environment of risk and uncertainty” with the rules change.

If completed, the merger between AbbVie and Shire would have been the largest one agreed upon in 2014.

AbbVie also agreed to pay Shire a breakup fee, estimated to $1.635 billion.

AbbVie Inc. was 1.95% up to close at $54.41 per share yesterday, marking a one-year increase of 12.58%. The company is valued at $86.70 billion. According to CNN Money, the 10 analysts offering 12-month price forecasts for AbbVie Inc. have a median target of $63.00, with a high estimate of $85.00 and a low estimate of $54.00. The median estimate represents a +15.79% increase from the last price of $54.41.