Boston, MA 09/18/2014 (wallstreetpr) – Research-based pharmaceutical company, AbbVie Inc (NYSE:ABBV) is facing the wrath of a pension fund in the U.S. since its merger with Shire PLC (ADR) (NASDAQ:SHPG) sought to shift its residential base to the United Kingdom. The Louisiana pension fund dragged the U.S. company to the court and charged them of inflicting significant capital-gains liability to its shareholders.
The acquisition of AbbVie Inc (NYSE:ABBV) by Shire PLC (ADR) (NASDAQ:SHPG) for $54.5 billion was the biggest in a recent spate of tax-inversion buyouts, Bloomberg reported. The pension fund said in a suit before the Delaware Chancery Court that the company should address the problems before being allowed to vote in the takeover issue. The Plumbers & Steamfitters Local 60 Pension Plan also questioned a coercive termination fee of $545 million under the deal.
The court case comes on the heels of the government officials’ firm determination to discourage the U.S.-based companies from being purchased by foreign competitors with a view to avoiding taxes. The U.S. President, Barrack Obama, has even termed such U.S. companies as ‘unpatriotic’ while the Treasury Department officials indicated recently that they would consider options before them to prevent such transactions from happening.
The pension fund accused AbbVie of not considering a taxable event in the U.S. by the Internal Revenue Service while striking a deal with Shire. As a result, shareholders of AbbVie Inc (NYSE:ABBV) would have to bear taxes that they would not have to pay. This would force them to divest their shares to escape the liability.
The acquisition deal between Shire PLC (ADR) (NASDAQ:SHPG) and AbbVie Inc (NYSE:ABBV), which was incorporated in Delaware, would allow the U.S. company to shift its residential address to the United Kingdom. However, they would continue to operate in the U.S. As a result, their tax rate would come down to 13% in 2016 from 22%.
The lower tax rate attracts the American companies to move their residential base to abroad much to the annoyance of the establishment. The fund cited that the shareholders would lose their rights and protections in case the company moves to Britain, where the laws are different.