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PHARMA GIANT ABBVIE’S $55 billion (€42.7 billion) deal with Dublin-based Shire is on the skids after the US government’s moves to stamp out so-called “tax inversions”.
The company told investors its board was rethinking the merger it had approved earlier this year as it digested the government’s “unilateral changes” to the country’s tax regulations.
The board wanted to consider the “fundamental financial benefits” of the deal in light of the new rules, it said.
Late last month the US Treasury said it was stepping in to stop “creative techniques” companies were using to maximise their profits including shifting their bases offshore in what are known as a tax inversions.
These “inversions” involve a company setting up a new tax base offshore after merging with or taking over an overseas business, despite in most cases keeping most of its staff and operations in the original home country.
While unrelated to the controversial Double Irish tax loophole, which Finance Minister Michael Noonan said he was phasing out as part of yesterday’s Budget, inversions involving Ireland-based firms have also drawn much ire from US officials.
Companies are able to take advantage of Ireland’s low corporate tax rate of 12.5% using the method even without relying on any further tax-avoidance schemes.
Withdraw or modify?
AbbVie’s board is yet to change its recommendation to investors to go ahead with the merger, but it now plans to meet next week to “consider whether to withdraw or modify its recommendation”.
http://giphy.com/gifs/rabbit-smosh-the-matrix-JFCTv9AvwFBJK
The Chicago-based company is worth about $86.2 billion (€68.2 billion) on today’s share price, compared to Shire’s current value of £30.6 billion (€38.2 billion) on the London stock exchange.
Shire’s share price plunged about 25% on the announcement and in a statement today the company said it was yet to be given any detailed information about AbbVie’s tax-related thinking.
Its board said it thought AbbVie should go through with the deal and noted the company was due a $1.65 billion (€1.30 billion) “break fee” if the US company backed out on the merger.
The news follows another US company, medical-device manufacturer Medtronic, announcing it still planned to go ahead with its €32 billion buyout of Ireland-based Covidien despite the treasury’s crackdown on inversions.
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But… But …. We’re attracting these companies because of our educated workforce and links to Europe right? Best small country to do business according to the dear leader… Surely he can’t have been wrong?
Ive been in many meetings where that sentence is the butt of a good few jokes.
This is down to American Tax law, so unless the cabinet are deciding American Tax Law then you’ve chewed too many of those pink tablets.
First of many deals to go I’m afraid.
Will facebook google and the like still be here in 10years?
IFSC will be the next ghost estate.
Cheerful.
You’re right. sad but true. Noonan should be making it easier for companies to dodge tax, not harder. It’s the only thing we have to offer. Our workforce is too expensive and the infrastructure is simply not on par, even with Poland.
Exactly. Who cares if we are offering them a way of paying less tax? It doesn’t matter if it boosts our economy at the expense of America’s. We are absolutely screwed if these companies pack up and leave due to decades of neglect towards indigenous businesses.
Obama the bollox
I thought the yanks just love the irish
no just the tax rates. and easily exploitable muppets in Government
Apparently only when we’re a tax haven.
what is it with the gimps who “run” this country , they always give away any “aces” they have up their sleeves for no payback. Its like they just want to be good poodles for their handlers in Europe
What has this to do with Ireland.
Some people really think that the world revolves around this place, that they are trying to shaft us or are laughing at us or we have it the worst in the world in this “kip”.
America is doing here what is in its own tax interest, they couldn’t give a fucj who is in charge here. That doesn’t come in to it.
What it does show is that focusing on Multi-nationals leaves the country very open to changes in American domestic policy.
Ordinary people were never going to benefit from this anyway
I work in the pharma industry here in Ireland and this takeover deal was (is?) huge. It is a great opportunity for Ireland – and UK based – Shire. The inevitable consequences of the negative publicity over the past year I’m afraid. Bad for business and bad for Ireland over the long term in my opinion.
Yea but no offense, the pharma industry has a lot to answer for in terms of ethics and general human health
It was bound to happen, given all the publicity. I’m confident our government will find some way around it, after all they’ve been codding us for years, Obama will be a doddle.
Very good, Martin! Let’s hope you’re right.
Keep big pharma away from this country, corrupted killers making money, should be buried in a desert somewhere.
shouldnt you be dancing at a crossroads somewhere?
With Comey maidens – or youths, whichever floats your boat?
The same desert you’ve your head buried in? Pharma and Med. Device companies are our biggest employers and account for over 50 billion in ex ports from this country. I bet you’d go to a faith healer if you got sick. Best of luck with that.
One thing about Pharma is the vast imports that it brings in as well, so the net benefit to the country is not as large as it looks when you say 50bn in exports.
Agriculture is surprisingly eaves the most in Ireland’s hands out of exports, money circulating in the economy than Pharma.
They are all just slices in a pie, mind you, but Pharma is in no way our largest sector employer. In all the companies and all the spin off jobs for there would still only be under 3% of the workforce.
Fools those who are negative & for giving in to the EU. US companies really only have a couple of choices uk, Israel or us. If the krauts spoke English they would go there. Posted on this before. Who gives a sh€t how much corporate tax they pay, it’s the PAYE, PRSI & USC take that makes the difference, by local employment. Shame on the government & naysayers for pushing reform. The right move was to cut it to 5% and stick two fingers to Brussels, what could they have done? Their broke, kick us out & watch everyone else jump with us. The tax on the fees alone on the merger alone would have been €50m – grow some balls Ireland. We’re paid up and EU is on the ropes
No more tax dodging and money laundering through Ireland for multinationals so.
One last point because the anti pharm guy’s wound me up. The U.S. Won’t change tax policy more than cosmetics. Who the hell do you think provides the $1bn it takes to get elected in the states? – Santa?
They just tryin drive a hard bizargain, know’m sayin?
For Christ sake it’s only 3-10% but the PAYE take is at least double of Ag, given the tax breaks. I’m a big fan of farming and the industry but the average Ag business doesn’t employ folks at the same rate after tax breaks. Cut corporate tax on strict employment requirements and the country will pick up. Even line factory guys pick up €20-30k+ per year all in. Farm folk just can’t pay that give the current prices. You think Iceland or Singapore would take this sh€t? We need to start looking after ourselves.
Uh oh
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