LONDON (The Deal) -- AbbVie (ABBV) forged a 32 billion pounds ($54.7 billion) takeover deal for Shire (SHPG) Friday, having agreed to a $500 million-plus, one-way breakup fee amid concerns a potential U.S. clampdown on companies switching tax domiciles could derail a transaction that the target described from the outset as risky.
Concerns about whether AbbVie would pull off the maneuver mounted this week on news that Treasury Secretary Jack Lew favored retroactive legislation to restrict the flow of American companies switching to lower-tax regimes.
The breakup fee would be capped at the standard 1% of the transaction value and would kick in if AbbVie changes its recommendation on the deal and its own shareholders vote against the transaction, or if the meeting is never held. The breakup fee is also applicable if AbbVie pulls the offer after the European Commission launches an in-depth antitrust probe.
In a conference call AbbVie chairman and CEO Richard Gonzalez repeatedly declined to comment on whether the breakup fee would be directly triggered by changes to U.S. tax rules. His company believes the deal is "highly executable," he said.
"Tax is clearly a benefit but it's not the primary rationale," he added. "My own point of view is the debate would be more appropriately shifted to tax reform. Companies like ours need access to our global cash flows and today we are at a disadvantage compared to our competitors."
As announced on Monday when Shire accepted the offer in principle, AbbVie, of North Chicago, will offer 2,444 pence in cash and 0.8960 of a new AbbVie share per share of the Dublin maker of the Vyvanse drug for attention deficit hyperactivity disorder. The price totals 5,248 pence per share, based on AbbVie's Thursday close, and the takeover would give Shire shareholders about 25% of the combined, New York Stock Exchange-listed company.