This is why Shire's share price has fallen the most on the FTSE 100

The US government wants to clamp down on tax inversions and Walgreens is staying put Stateside.

by Rachel Savage
Last Updated: 05 Mar 2015

When Shire gave in to fellow pharma giant AbbVie’s overtures last month, the US-British £31bn takeover looked like a done deal. Why, then, have Shire’s shares fallen more than 4.5% to £46.80, well below the £53.20 per share AbbVie offered?

Investors are worried the deal could now be derailed, as the US government makes increasingly disapproving noises about tax ‘inversions’ - companies buying British businesses and moving their headquarters here to take advantage of lower corporate taxes. Which is why AbbVie went after Shire in the first place - its average tax rate would plummet from 22% to 13%.

The US Treasury said yesterday it was looking into whether it could block such deals without having to get a bill through deadlocked Congress. President Obama also weighed in recently, soundly eerily like Public Accounts Committee chair Margaret Hodge when he said, ‘I don’t care if it’s legal. It’s wrong.’

The pressure was also ratcheted up by Walgreens announcing earlier today it is buying the 55% of Alliance Boots it doesn’t own, but not shifting it’s headquarters across the Atlantic. That also hit Astra Zeneca, which investors had thought may be swooped on again by Pfizer after it fended off offers earlier this year, sending shares down more than 4%. Medical equipment company Smith & Nephew, another potential takeover target, fell almost 4% too.

The US government obviously shouldn’t be surprised at companies looking to escape higher taxes. If they don’t want them to leave, the simple answer is to bring tax rates into line with other countries. More draconian measures probably aren’t the best way to encourage investment and increase employment.

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