Note that the old ABT (pre ABBV spinoff) wouldn’t have been able to engineer a tax inversion with SHPG because it was too large a company for SHPG to have met the 20% threshold for an inversion (even if the deal consideration had been 100% in stock).
Thus, there’s a side benefit to US-based companies getting smaller via corporate spin-offs that was rarely if ever discussed until the recent cascade of tax-inversion deals.
p.s. I will add the ABBV-SHPG merger to the table in #msg-104104101 when the terms become finalized.
Shire ADR holders will receive £73.32 in cash and 2.688 ABBV shares, for a nominal deal price of $273.21* (based on yesterday’s exchange rate and closing price of ABBV), consisting of 47% cash and 53% stock. The nominal deal price is a 53% premium to SHPG’s “unaffected” share price prior to ABBV’s first merger offer on 5/2/14. The nominal deal size is $54.8B.
SHPG ADRs are currently trading at $257.47, a 4% discount to the nominal deal price, which reflects some uncertainty regarding threats by US elected officials to block tax inversions. However, the risk of legislation being made retroactive or being enacted prior to deal closing is very remote, IMO.
Consummation of the deal requires a majority vote of the shareholders of each company. Shire’s CEO, Fleming Ornskov, will become head of the merged company’s Rare Diseases segment, which will be run as a separate entity (similar to the way SNY operates Genzyme).
If the deal is nixed because of legislative changes to restrict tax inversions, ABBV will owe Shire a $1.6B breakup fee; if the deal is nixed because ABBV shareholders vote it down, ABBV will owe Shire a $500M break-up fee.
For ABBV’s US shareholders, the merger will be fully taxable.
-- *Each SHPG ADR represents three shares of Shire traded in London.
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