By Jonathan Davies

US pharmaceutical firm AbbVie has decided to pull out of a deal to buy UK rival Shire worth £32bn.

AbbVie yesterday (Wednesday) announced it was considering pulling out of the deal and said it would discuss the decision on 20 October.

But the board has confirmed it will recommend that its shareholders vote against the deal.

It said tax changes introduced by the US government had left an "unacceptable level of uncertainty" over the deal.

The US government has launched a crackdown on firms moving their headquarters abroad to avoid paying US taxes. If AbbVie and Shire had merged, the company would have been based in Jersey.

In a statement, Richard Gonzalez, AbbVie's chairman and chief executive, said: "The agreed upon valuation is no longer supported as a result of the changes to the tax rules and we did not believe it was in the best interests of our stockholders to proceed."

Shire has recommended that its shareholders approve the deal, but insists that AbbVie will have to pay a $1.6bn "break-fee".

Shire's share price has suffered hugely as a result of AbbVie pulling out. It fell by 22% on Wednesday and a further 11% in early trading today (Thursday).

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