|
 The move could jeopardize an agreed deal for AbbVie to buy Shire for
$55 billion and deter Pfizer from making another attempt to acquire
AstraZeneca, after a $118 billion takeover attempt failed in May.
The slide in both companies shares wiped out around $8 billion in
their combined market value, with AstraZeneca down 5.0 percent and
Shire losing 6.1 percent by 1115 GMT (7.15 a.m. EDT). AbbVie lost
4.6 percent in pre-market U.S. dealings.
Smith & Nephew and Swiss biotech group Actelion, two other perennial
targets of bid speculation, fell 3.5 percent and 2.2 percent
respectively.
Investors had been expecting some action from the Obama
administration to clamp down on tax-avoidance inversions but the
steps announced on Monday were more far-reaching than anticipated,
analysts at Deutsche Bank said.
The new rules, effective immediately, will make new inversions more
difficult to do and less potentially rewarding - but whether that
will be enough to scupper deals that are pending or under
consideration is not clear.
The action follows months of political debate, with Democrats urging
prompt legislative action and Republicans pushing to address the
problem later, perhaps in 2015, as part of a broader overhaul of the
loophole-riddled federal tax code.
"Inversion deals now are clearly going to be very difficult to pull
off," Navid Malik, head of life sciences research at Cenkos
Securities, said.
That could kill off prospects of Pfizer returning to bid for
AstraZeneca at the end of November, when a six-month cooling-off
period imposed by British takeover rules comes to an end and the
U.S. group can publicly launch a new offer, Malik said.
Other analysts were less certain. Andrew Baum of Citi said the
Treasury move would have a limited impact on the economic case for a
Pfizer-AstraZeneca deal - though the threat of additional measures
could give the U.S. group pause - and he still expects Pfizer to
return after the Nov. 26 deadline.
Both Pfizer and AstraZeneca are bound by rules that mean they cannot
comment on deal prospects. However, the British firm said previously
that the controversial tax issue was a big risk for investors that
could cause major delays to any transaction.
The Shire deal may still go ahead, since it is already in train,
although AbbVie will likely lose upside from planned tax savings,
making the picture uncertain. The transaction is due to be completed
in the fourth quarter of 2014.
"Shire has enough momentum in its business and a good enough
pipeline that it would be attractive to AbbVie anyway," Malik said.
"The tax inversion was the icing on the cake."
[to top of second column] |
Shire and AbbVie officials did not have any immediate comment on the
latest developments.
INVERSION SURGE
Inversions have surged in the past year, pursued by healthcare
companies in particular, although fast-food chain Burger King
Worldwide is also in the midst of inverting to Canada in a deal with
Tim Hortons.
Medical technology group Medtronic, meanwhile, is working to close
an inversion deal into Ireland with rival Covidien, while Mylan
plans to buy certain Abbott Laboratories' drugs in developed markets
outside the United States in another tax-cutting transaction.
About 50 such deals have taken place since the early 1980s, but the
pace has picked up, with half of those completed since the 2008-2009
credit crisis, according to a Reuters review.
A key target of Treasury's actions is foreign profits held offshore
by U.S. multinationals under a U.S. Internal Revenue Service (IRS)
rule that defers taxation on such profits unless and until they are
brought into the United States.
One new Treasury rule will prevent inverted companies from using
"hopscotch" loans that allow them to avoid dividend taxes when
tapping such tax-deferred foreign profits. Another rule will bar
inverters from gaining access to the same kinds of profits by using
"decontrolling" strategies that restructure foreign units so they
are no longer U.S.-controlled.
Treasury is also tightening limits on the levels of ownership that
the former U.S. owners can have in an inverted company to qualify
for foreign tax treatment from the IRS, a move that will make it
harder to do these deals.
(Editing by Jane Merriman and Michael Urquhart)
[© 2014 Thomson Reuters. All rights
reserved.] Copyright
2014 Reuters. All rights reserved. This material may not be
published, broadcast, rewritten or redistributed. |
