AbbVie calls off Shire acquisition

North Chicago-based pharmaceutical company AbbVie Inc. officially called off its planned $55 billion acquisition of Irish drug manufacturer Shire plc Monday, citing changes that would eliminate tax benefits for AbbVie by moving its headquarters to Ireland.

The company said changes in tax law being led by the U.S. Treasury Department “introduced an unacceptable level of risk and uncertainty given the magnitude of the proposed changes” of the process known as a tax inversion, where a U.S. company buys or merges with a company in a country with lower corporate tax rates, then moves its headquarters there.

“The executive management team ultimately concluded that the transaction was no longer in the best interests of stockholders at the agreed-upon valuation,” the company said in the release.

AbbVie said Shire has agreed to termination of the offer, and as a result the company will be released from any contractual obligations, according to the release. However, AbbVie will be required to pay a $1.64 billion breakup fee.

AbbVie's Chairman and Chief Executive Officer Richard A. Gonzalez criticized the U.S. corporate tax system.

“The unprecedented unilateral action by the U.S. Department of Treasury may have destroyed the value in this transaction, but it does not resolve a critical issue facing American businesses today,” Gonzalez said in the release. “The U.S. tax code is outdated and is putting global U.S.-based companies at a disadvantage to foreign competitors in an area of critical importance, specifically investing in the United States.

“Comprehensive tax reform is essential to create competitiveness and to stimulate investment in the economy,” he added.

AbbVie is the second suburban-based company to walk away from a tax inversion opportunity. Drugstore chain Walgreen Co. last August decided to keep its headquarters in Deerfield following its $15,3 billion purchase of its remaining stake in European health and beauty chain Alliance Boots.

In September, Deerfield-based niche drugmaker Horizon Pharma acquired Irish company Vidara Therapeutics for about $660 million and relocated its headquarters to Ireland.

• Associated Press contributed to this report