North Chicago drugmaker AbbVie has reached a roughly $55 billion deal to combine with British counterpart Shire and become the latest U.S. company to seek an overseas haven from corporate income tax rates back home.
The companies said Friday that Shire shareholders will receive cash and stock valued at about 53.19 pounds ($91.07) for each of their shares. They will control about 25 percent of a new company created as part of the deal. AbbVie shareholders will hold the remaining 75 percent.
That new company will be incorporated on the British island of Jersey, where Shire currently is headquartered.
U.S.-based multi-national companies looking to grow through acquisitions have been searching more often in recent years for these overseas combinations known as inversions. The deals have raised concern from President Barack Obama and members of Congress because they can cost the United States billions of dollars in tax revenue.
At 35 percent, the United States has the highest corporate income tax rate in the industrialized world, and it also taxes income earned overseas and then brought home.
AbbVie has said it expects the combined company to pay a tax rate of about 13 percent by 2016 after AbbVie reincorporates on Jersey. That would be down from its current rate of roughly 22 percent.
Inversions can take place if shareholders of the foreign entity involved retain more than a 20 percent ownership in the newly merged business. Legally, the foreign company might acquire the U.S. business or the two create a new entity. But the U.S. company often maintains both its corporate headquarters and control of the company.
U.S.-traded shares of Shire PLC fell $2.66 to $250.78 before markets opened Friday and after the deal was announced. Shares of North Chicago, Illinois-based AbbVie closed Thursday at $53.52.