AbbVie’s board is telling shareholders vote against its own $55 billion takeover bid for the Irish drugmaker Shire after the U.S. made reincorporating overseas a less lucrative tax maneuver.

The company, based in North Chicago, Illinois, said that changes led by the U.S. Treasury Department introduced an “unacceptable level of uncertainty” and eliminated some of the financial benefits.

If Abbvie does walk away, it would be the biggest deal yet that has collapsed after a public backlash and changes in U.S. tax policy.

Walgreen scotched its $5 billion bid for the U.K.’s Alliance Boots in August and earlier this month, Salix Pharmaceuticals scrapped its merger with a subsidiary of an Italian drugmaker.

The new regulations pushed by the Obama administration aim to limit the practice known as an inversion, in which a U.S. company buys or merges with a company in a country with lower corporate tax rates, and then reincorporates there.

U.S. companies typically keep their physical corporate headquarters where they are, in the U.S.

Numerous companies, many in health care, had announced their intention to pursue inversions in recent months.

Shire has insisted AbbVie Inc. go ahead with the takeover and reincorporate on the British island of Jersey, whereShire is incorporated. Since Abbvie said it was reconsidering such a maneuver earlier this week, Shire’s stock has plummeted more than 24 percent.

Abbvie has not budged from its stance.

“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,” said AbbVie’s chairman and CEO Richard Gonzalez.

Shire said Thursday that its board is considering the most recent development and will make a further announcement in due course.

AbbVie faces a breakup fee of around $1.6 billion if it walks away from the deal.

Date: October 16, 2014

Source: Associated Press