In what could have been a major pharmaceutical acquisition and one of the biggest tax inversion deals, Chicago-based AbbVie has recommended its shareholders vote against its proposed $54 billion takeover of Shire, a Dublin-headquartered pharmaceutical company specializing in medications to treat attention deficit disorder and rare diseases

The decision to scuttle the deal had been anticipated since AbbVie decided to reconsider the acquisition after the U.S. Treasury announced last month to unilaterally change the tax rules regarding inversion, or overseas reincorporation to take advantage of another country’s lower tax rate. The Treasury is seeking to make acquisitions to avoid U.S. taxes more difficult. AbbVie’s deal with Shire, announced in July, would have allowed it to reincorporate in Great Britain to take advantage of its lower tax rate. The rule changes also ban loans that allow U.S. firms to access foreign cash without paying U.S. taxes.

Assuming AbbVie shareholders reject the transaction, Shire will receive a break-up fee of approximately $1.64 billion. Reaction to the termination announcement prompted a 30% drop in Shire’s shares on Wednesday, closing at $170.49, down $74.08. AbbVie’s share rose 50 cents to $54.63.

“Although the strategic rationale of combining our two companies remains strong, the agreed on valuation is no longer supported as a result of the changes to the tax rules, and we did not believe it was in the best interests of our stockholders to proceed,” Richard A. Gonzalez, AbbVie’s chairman and CEO, said in a statement.

In a press release, AbbVie said the U.S. Treasury changes eliminated certain financial benefits of the transaction, most notably the ability to access current and future global cash flows in a tax efficient manner, and they “fundamentally changed the implied value of Shire to AbbVie in a significant manner.”

The lack of tax-free access of its offshore cash holdings seemed to be a primary motivation for its board of directors to halt the takeover, according to some Wall Street analysts. AbbVie had $9 billion on its balance sheet as of June 30.

“AbbVie was already aware of the Treasury proposals, and the only piece of recent news was the potential changes to Irish tax laws, which should not have had an impact on the deal unless a new structure was being contemplated utilizing Ireland in some fashion,” Douglas Miehm, an analyst at RBC Dominion Securities, wrote in a research note.

Ireland this week announced new proposals for 2015 on corporate taxes aimed at curbing aggressive tax planning by overseas firms. The goal is to eliminate the widely known “double Irish” tax loophole, which allows Irish-resident companies to be nonresident for tax purposes.

In a brief statement, Shire said it was considering the situation and a further announcement would be made in due course. The company, which has a strong track record of acquisitions, could use the anticipated break-up fee to acquire other companies and expand its portfolio.

AbbVie’s reconsideration is considered a major victory by the Obama administration and the U.S. Treasury, which has been fighting to make tax-avoiding acquisitions more difficult.

The reconsideration follows the unraveling of a smaller deal earlier this month, when Salix Pharmaceuticals of Raleigh, N.C., terminated an agreed $2.6 billion merger with Cosmo Pharmaceuticals of Lainate, Italy. That deal would have located the combined company in Ireland. Salix’s decision to walk away requires it to pay Cosmo a $25 million break-up fee.

Concerns over tax inversions first came to light in May, when Pfizer sought to acquire U.K.-based AstraZeneca. Although AZ rejected the $118 billion bid, U.S. lawmakers voiced concern about Pfizer’s possible tax shift to the U.K.