Vitamins made by Shire are displayed at a chemist's in northwest London
Vitamins made by Shire, which will merge with US giant AbbVie, are displayed at a chemist's Reuters

US pharmaceutical giant AbbVie has agreed a $53bn merger with UK counterpart Shire that will see it drastically reduce its tax bill.

The two firms' boards shook hands on the joint cash-stock deal, worth £32bn in sterling, after previous offers had been turned down by Shire bosses. It will see Shire shareholders receive £24.44 and 0.8960 in New AbbVie – the merged entity – stock per share they hold.

AbbVie, which produces the arthritis drug Humira and had sales of $19bn in 2013, said a new UK-based entity will allow it to reduce its effective corporate tax rate to 13% from its current 22%.

The UK has been cutting its corporation tax rate since 2010 to entice new businesses. It will drop to 20% from April 2015. Chancellor George Osborne has also introduced the "patent box", a tax break for new drugs developed and manufactured in the UK.

"By combining AbbVie and Shire, we're creating a unique, diversified biopharmaceutical company," said Richard A. Gonzalez, chairman and chief executive of AbbVie.

"The combined company would benefit from a best-in-class product development platform, a stronger pipeline and more enhanced R&D capabilities."

Susan Kilsby, chairman of Shire, said the offer "reflects the substantial value that we have already created".

"We believe that the combined group represents an exciting fit of two complementary businesses that will create a new market leader in specialty pharmaceuticals with a portfolio of fast growing products, a promising pipeline and enhanced growth prospects," she said.

London-listed Shire, which manufactures hyperactivity drug Vyvanse, generated $4.9bn of revenue in 2013 and has 5,000 employees across 30 countries. AbbVie, listed on the New York Stock Exchange, employs 25,000 in 170 countries.