Bank Of America Believes Anti-Inversion Rules Are Not A Deal-Breaker For AbbVie Inc

In a report published Tuesday, Bank of America analyst Colin Bristow reiterated a Buy rating and $65.00 price target on AbbVie Inc (NYSE: ABBV).

In the report, Bank of America noted, “Yesterday, the US Treasury issued a notice outlining changes to various aspects of the tax code with a view to preventing inversions or making them economically less attractive. The changes are effective to transactions that closed yesterday or anytime thereafter. This update was not unexpected, given recent commentary by US treasury secretary Jack Lew. A key revision to the tax code that is relevant to the ABBV-Shire deal is section 956, which deals with ‘hopscotch' loans, and was the primary way that ABBV was going to access its substantial offshore earnings.

"Our preliminary view is that, while these changes impact some of the realizable tax benefits from the ABBV-Shire deal, there are strong strategic and financial rationale that still make the deal attractive. In addition, we believe ABBV has guided conservatively on the tax benefits and could still realize a meaningful reduction in tax rate through access to Shire's US cash flow. Also, we see the cost synergies that can be realized as underappreciated by the Street. We await commentary from ABBV, but continue to believe the deal progresses.”

AbbVie Inc closed on Monday at $58.71.