Market Report: Shire tumbles amid concerns of new restrictions on American corporates buying overseas companies

 

Concerns that the M&A boom could be over worried the City yesterday.

More than $100bn of deals were pulled in the US on Tuesday and concerns about US laws on tax bases saw shares in Shire wobble. The drugs specialist, which is being bought by US-based AbbVie, tumbled 205p to 4,671p amid concerns of new restrictions on American corporates buying overseas companies to avoid US taxes. News that the US drugstore Walgreen won’t move its tax base here after completing its deal to buy the remainder of Alliance Boots also pushed the issue back into the spotlight.

Stocks that were recently buoyed by takeover talk slumped. AstraZeneca, the drug giant that batted away a bid from Pfizer in May, fell 155.5p to 4,190p and Smith & Nephew, the maker of knee replacements that has long been a takeover candidate, fell 44p to 1,020p – taking the wooden spoon.

But one deal that has finally gone through is the £3.7bn merger of the retailers Dixons and Carphone Warehouse. Dixons shareholders will receive 0.155 of a new Dixons Carphone share. Dixons was unmoved and closed last night at 52.95p and Carphone lifted 1.5p to 343.2p. The new entity will begin trading today. The Eastern European drinks group Stock Spirits is set to take the vacant spot in the FTSE 250 but it closed down 1.5p to 308.5p yesterday.

The wider market was hit by increased fears about further violence in Russia and Ukraine and poorer than expected data from Germany.

The FTSE 100 tumbled 46.32 points to 6,636.16 as traders feared the bull run could be coming to an end.

One of the few risers was the metal miner Fresnillo after its results on Tuesday were better than expected. The share price rise was also attributed to the large amount of short sellers that have been borrowing the stock – causing a short squeeze. Fresnillo was top of the table, up 58.5p to 985p.

The worst faller on Aim was Hotel Corporation after administrators were appointed to a hotel group in which it holds a 49.92 per cent stake. It said it had already written down the value to nil previously but shares fell 0.42p to 0.78p.

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