Shares in FTSE 100 pharmaceutical firm Shire have fallen 27% on opening amid renewed doubts that AbbVie's proposed takeover will go ahead because of new US tax rules.
Investors took flight - wiping £8.5bn from Shire's value in a matter of minutes - after Chicago-based AbbVie said it would reconsider its recommendation to shareholders to back the planned £55bn (£32bn) takeover of Shire.
The move followed a decision by the US authorities last month to impose new rules in a bid to prevent firms moving their tax bases overseas to ease costs.
London-listed Shire responded to AbbVie's announcement by releasing a statement saying it believed AbbVie should proceed, despite the change to the tax regulations, arguing a change of heart would cost AbbVie $1.6bn (£1bn) in fees to Shire.
Its release said: "The board of Shire believes that AbbVie should proceed with the recommended offer on the agreed terms in accordance with the Cooperation Agreement.
"The board will meet to consider the current situation and a further announcement will be made in due course.
"The Board of Shire notes that, in the event that the AbbVie Board adversely changes its recommendation and AbbVie stockholder approval is not obtained (or another triggering event occurs), a break fee of approximately $1.635bn would be payable by AbbVie to Shire."
AbbVie's proposed acquisition of Shire was not solely driven by tax benefits, it also wanted to reduce its reliance on Humira, the world's top selling arthritis drug which loses US patent protection in 2016.
Under the terms of the cash and stock offer that was agreed in July AbbVie would own 75% of the new entity - giving Shire investors a greater stake than the 24% previously proposed.
Shire had rejected four earlier offers.
Its best selling product is hyperactivity drug Vyvanse, which achieved revenues of $1.2bn (£753m) last year.
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