Reuters - Video

Edition: US | UK | IN | CN | JP

Finance Videos

AbbVie's u-turn hurts hedge funds too

Thursday, October 16, 2014 - 02:00

U.S. drugmaker AbbVie has pulled the plug on its $55 bln plan to buy Dublin-based Shire. Hayley Platt looks at the wider implications of their decision.

▲ Hide Transcript

View Transcript

It was largely expected now its almost certain. Drugmaker AbbVie have advised its shareholders to vote against the planned $55 billion takeover of Shire. New U.S. laws, making tax inversions less attractive appear to have tipped the balance. The news pushed Shire shares down another 11 percent - and they'd already lost $13 billion IG's Alastair McCaig SOUNDBITE: Alastair McCaig, Markets Analyst, IG, saying (English): "I guess they'll be benefitted in a small way by the $1.6 billion penalty that they'll receive on the back of AbbVie very much looking like they're going to pull out of this." The U.S. Treasury has been fighting to make tax-avoiding acquisitions more difficult. And AbbVie's U-turn could be seen as its first victory. But the change of heart has meant heavy losses for many of the world's top hedge funds. One in particular - run by billionaire John Paulson - has reportedly lost around $700 million dollars. Quentin Webb of Reuters Breakingviews says a megadeals drought over the past year has been part of the problem. SOUNDBITE: Quentin Webb, Reuters BreakingViews, saying (English): "There's been too much money chasing those opportunities so the spreads, the difference between the price you can buy the stock and the price at which the deal would close, that has gone down a lot so actually the kind of potential returns, even from deals that go as planned have come down." Earlier this year AstraZenca rejected a $118 billion bid from Pfizer. Shire's fate hasn't entirely stopped speculation that the deal may be revived. SOUNDBITE: Alastair McCaig, Markets Analyst, IG, saying (English): "I still think that the Pfizer AstraZeneca deal is something slightly different. Pfizer have a number of patents that are going to expire next year, they need to replace them, haven't been doing enough research and development on their own and the attractiveness of U.S. focussed products in the pipeline that AstraZenca have still makes it a very attractive proposition even without the tax benefits." Tax experts say inversions are still possible. And it's thought Shire could still be a target. But any new suitor must be less driven by tax advantages

Press CTRL+C (Windows), CMD+C (Mac), or long-press the URL below on your mobile device to copy the code

AbbVie's u-turn hurts hedge funds too

Thursday, October 16, 2014 - 02:00