US pharmaceuticals group AbbVie faces an unexpected €572 million Irish stamp duty bill in relation to its planned takeover of Dublin-domiciled peer Allergan, the maker of Botox, as a result of measures introduced in Budget 2020.
The $63 billion (€57.2 million) tie-up, announced in July, is being carried out by way of a scheme of arrangement takeover structure, which will involve Allergan cancelling its existing shares and issuing new stock to the acquirer.
Although this type of deal – used routinely in takeover deals involving Irish public limited companies – previously got around 1 per cent stamp duty that applies to the sale of shares in Irish companies, Minister for Finance Paschal Donohoe introduced measures that took immediate effect on Tuesday night that imposed the duty even under a "share cancellation scheme".
The immediate target of the Budget 2020 measure was property group Green Reit's planned €1.34 billion sale to UK real estate investment firm Henderson Park. However, Allergan, as an Irish-domiciled company, is also caught by the stamp duty, even though its shares are traded in New York and its top executives operate from New Jersey.
“We are aware of the recently enacted legislation and are considering its applicability to the transaction,” a spokeswoman for AbbVie said.
A spokeswoman for Allergan didn’t respond to a request for comment.
The 1 per cent stamp duty is half the termination fee rate – equating to €1.26 billion – that AbbVie would face if it walked away from the merger. Shareholders in Allergan are set to vote on the deal at an extraordinary general meeting in Dublin on Monday.
AbbVie employs about 600 in the Republic, while Allergan employs 1,700.
Humira
AbbVie is betting the acquisition will improve its offering as its Humira drug, the world’s best-selling treatment for inflammatory diseases, is set to face competition from generic versions as the drug goes off patent in the US.
Allergan’s portfolio is best known for Botox, a hugely popular non-surgical cosmetic treatment, but the company also makes drugs that are used in eye care, gastroenterology and to treat the central nervous system.
Meanwhile, Mr Donohoe’s officials had looked last year into whether the 1 per cent stamp duty on share trading in Irish companies should be lowered or scrapped altogether.
There had been anticipation that the Minister would move to at least lower the rate to match the UK’s 0.5 per cent levy in the context of positioning the Republic for Brexit.
However, Department of Finance staff concluded – following a consultation period – that almost €400 million of annual tax the duty was generating for the exchequer was too much for the Government to give up.
The introduction of a stamp duty on schemes-of-arrangement takeover deals involving a “cancellation scheme” will increase the tax haul for the exchequer.
While Department of Finance staff provided estimates in documents published on Tuesday for how much various tax changes introduced in Budget 2020 will raise, they did not provide any forecasts for the new stamp duty, as it will be deal dependent.
