AbbVie is walking away from its proposed $55 billion takeover bid of Shire and has agreed to pay the rival drugmaker a $1.64 billion breakup fee.
The two companies said Monday that they deal was off following the decision last week by AbbVie's board to withdraw support from the proposed acquisition.
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Shire had rejected several unsolicited offers from AbbVie before the companies made the deal in July.
North Chicago-based AbbVie had envisioned buying Shire and reincorporating on the British island of Jersey, where Shire is incorporated.
But AbbVie's board got cold feet after the U.S. government created new limitations on the tax benefits of incorporating overseas.