AbbVie, the US pharmaceutical company, has said it is reconsidering its $54 billion takeover of UK drug maker Shire, putting it on track to become the biggest deal to be torpedoed by a White House crackdown on tax inversions.
AbbVie said in a statement late on Tuesday that its board would meet next week to reconsider there commendation it made in July, when it advised shareholders to vote in favor of a deal that would have created one of the largest pharmaceutical companies in the world.
The Chicago-based company said: "AbbVie's board will consider, among other things, the impact of the US Department of Treasury's proposed unilateral changes to the tax regulations announced on September 22, 2014, including the impact to the fundamental financial benefits of the transaction." Shire declined to comment.
The collapse of the deal, the largest ever US takeover of a European group, would cast doubt on one of the biggest drivers of deal making this year as companies have looked to use foreign takeovers to lower their taxes.
There have been 14 tax inversion deals so far this year, according to data from Dealogic and Credit Suisse. In these transactions US companies use a takeover to move their domicile to Europe to take advantage of lower corporate tax rates and access offshore cash without having to repatriate it and face US taxes.
Some of the biggest names in the hedge fund industry will be left nursing big losses if the deal falls through, after they piled into Shire's shares in anticipation of a transaction.
Paulson & Co, the hedge fund manager controlled by John Paulson, owns a 4.7 per cent stake in Shire, according to Bloomberg data, making it the group's second-largest shareholder. Other well-known hedge funds, including Elliott Capital and Magnetar Financial, are also big investors.
US-listed shares of Shire fell 8 per cent to $225 in after-hours trading in New York. AbbVie lost 2.1 per cent to $54.13.