Shire Shares Slump 22%

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The ongoing dramatics involving the potential acquisition of Shire (LSE:SHP) by AbbVie (NYSE:ABBV) has given Shire’s share price a punch in the solar plexus today, making it the FTSE’s biggest loser on the day. Not only has the wind been knocked out of Shire’s sails, but there may be a storm brewing on the horizon.

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Once AbbVie announced that it was not likely to continue to pursue Shire, Shire shares slumped by as much as 28%, regaining some ground to close down 21.9%

This story has been both dramatic and volatile for Shire over the last several months. Even though¬†Shire originally rejected AbbVie’s overtures¬†as far back as June of this year, speculation drove the stock upwards. After several rounds of courting followed by rebuffs, Shire finally succumbed to shareholder pressure that had been stimulated by AbbVie.

AbbVie’s turnabout cost Shire $13 billion in market capitalization today. What bothers me more (it’s not my $13 billion) is that the reason that AbbVie is walking away is precisely what they denied as being the reason for wanting to make the deal in the first place – the anticipation of a tax advantage gained by moving AbbVie’s corporate headquarters to Ireland.

Back in the summer their proposal was that they were in love with the potential that the two companies would achieve through their synergies. I think we’ve all heard that old pickup line before. I don’t care how many times they said it, I, for one, never believed it. I’m betting that you didn’t either.

Well, it seems that the Obama administration has decided to make it more difficult for U.S. based companies to toddle offshore. As usual with the current administration, they have stood around with their hands in the pockets and their fingers up their…uh…nose, acting just in time to potentially prevent this latest corporate departure. The Obama people have finally realized that the tax gain received by fleeing corporations is a revenue loss for the government.

But not all is lost. Shire should receive as much as $1.6 billion in reparations if AbbVie does, indeed, walk away.

On the other hand, the potential breaking of the deal is leaving another group more than a little upset. The Telegraph is predicting an “Arbageddon” as the arbitragers who had bet on a positive outcome of the proposed merger are threatening litigation should the deal collapse.

Meanwhile, the board that rejected the original AbbVie proposals now says that it “believes that AbbVie should proceed with the recommended offer on the agreed terms in accordance with the cooperation agreement.”

The drama continues.

 

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