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$53b acquisition of Shire to be announced Friday

The acquisition of Shire will allow AbbVie, based outside Chicago, to reincorporate in Britain and reduce its tax bill. Washington is increasing scrutiny of such deals.

Suzanne Plunkett/REUTERS

The acquisition of Shire will allow AbbVie, based outside Chicago, to reincorporate in Britain and reduce its tax bill. Washington is increasing scrutiny of such deals.

The biggest deal of the year is set to be announced on Friday morning, as pharmaceutical giant AbbVie plans to announce a $53 billion acquisition of Shire, according to people briefed on the matter.

The deal will allow AbbVie, based outside Chicago, to reincorporate in Britain and reduce its tax bill, representing the largest ever merger to seek an inversion as a rush of US companies are pursuing the financial advantages of moving overseas. Shire is based in Lexington and has 1,500 employees here, though it is incorporated in Ireland.

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AbbVie is pursuing the deal even as lawmakers move to crack down on the increasingly popular maneuver.

On Thursday, Senator Orrin G. Hatch, the Utah Republican who is the ranking member of the Senate Finance Committee, responded to calls from the Obama administration to crack down on inversions by saying he supported a short-term fix, though he suggested the administration’s initial proposal went too far.

An agreed deal between AbbVie and Shire comes after almost two months of sometimes testy negotiations. On Monday, Shire said its board had recommended a cash-and-stock deal in which AbbVie would pay about $91 a share for it.

The accepted offer is a full 53 percent above Shire’s closing price on May 2, the day before AbbVie made its first offer, which was rejected, and came only after a series of increasingly rich bids. Its fifth offer was finally accepted this week. Shire shareholders will own about 25 percent of the combined company.

Representative for both companies were said to be completing legal details of the deal on Thursday, as both companies raced to meet a deadline: for a firm offer. After news of AbbVie’s interest in Shire was leaked, British takeover rules required that AbbVie reach a deal by July 18 or walk away for at least six months.

The deal will combine Shire’s stable of products, including Adderall, used in the treatment of attention deficit disorder, with AbbVie’s assets, which include Humira, which is used to treat arthritis. Humira comes off patent protection in 2016. The enlarged company is likely to have annual sales of about $25 billion.

“This transaction is a combination of two leading companies with leadership positions in specialty pharmaceuticals that would create a global market leader with unique characteristics and a compelling investment thesis,” AbbVie’s chief executive, Richard A. Gonzalez, said in his most recent statement arguing for the deal.

Though analysts believe there is strategic merit to the combination, the draw of an inversion is also part of the equation. By moving to Britain, AbbVie will pay lower taxes on its international earnings, get access to overseas cash more cheaply, and be able to acquire other companies without making their earnings subject to US taxes.

AbbVie last month said it expects the combined company’s effective tax rate to be about 13 percent, sharply lower than the current 22 percent it pays now.

AbbVie, which was spun out of Abbott Laboratories last year, will become the latest and largest American company to look overseas for tax relief. Health care companies have pursued inversions with particular zeal: AbbVie will join health care companies including Medtronic, Mylan, Actavis, Perrigo, Jazz Pharmaceuticals, and Endo to strike inversion deals in recent years.

The use of such transactions is drawing increased scrutiny in Washington. On Tuesday, Treasury Secretary Jacob J. Lew sent letters to senior members of Congress, encouraging them to pass legislation halting inversions. The legislation being considered by some lawmakers would be retroactive, and if passed, could impede AbbVie’s ability to reincorporate in Britain.

Responding to Lew, Hatch said that he shared the administration’s concern about the increased pace of inversions. But he questioned the wisdom of retroactive legislation.

“I must disagree with the administration’s position that we should, in the short term, enact punitive, retroactive policies designed to force companies to remain domiciled in the United States,” the senator said in a letter to the Treasury secretary.

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