AbbVie reveals Shire rejection of $46 billion bid

AbbVie has revealed that it has approached UK-based specialist firm Shire with a friendly takeover bid on three occasions, but has been rejected each time.

The US company, best known for its rheumatoid arthritis blockbuster Humira, has gone public with the news after growing speculation about possible moves for Shire.

The latest bid is worth £27 billion – $46 billion – but could rise further in the coming weeks as AbbVie’s bid goes public.

Shire is one of a number of fast-growing specialist pharma companies which are attractive takeover targets for big pharma companies looking to secure future growth. However Shire is also resident in Ireland, a low tax territory, but is otherwise a UK registered company – this makes it doubly attractive as a potential ‘tax inversion’ target for AbbVie.

This is exactly the same added incentive behind Pfizer’s takeover bid for AstraZeneca, which eventually faltered in May after several bid were rebuffed by AstraZeneca’s board.

Shire has now confirmed that AbbVie approached it for the first time on 5 May, then returned with a higher bid on 13 May, and then with another improved offer on 30 May, this time with a possible cash and share offer comprised of £20.44 in cash and 0.7988 AbbVie shares per Shire share.

Just as with the Pfizer bid for AstraZeneca, the proposal involved a new US listed holding company with a UK tax domicile.

The offer represent a premium of 23% to Shire’s share price of £37.38 yesterday, before the news of the bid broke.

Shire says it a meeting with AbbVie was held to enable AbbVie to explain key aspects of the proposal, but that Shire’s board decided unanimously to reject the bid as too low.

Once again like AstraZeneca, Shire has also raised concerns regarding the ‘execution risks’ associated with the tax inversion structure, with the bid potentially being subject to regulatory reviews.

Shire defends its strategy

Shire must now publicly defend its own ‘go it alone’ strategy – but must be one of the best prepared in the sector for this eventuality – as speculation about possible takeover bids for it have been swirling for years.

The company is best known for specialising in the field of attention deficit hyperactivity disorder (ADHD) drugs, but has successfully expanded into lucrative rare disease areas.

The firm has also been on the acquisition trail itself over the last few years, most recently purchasing Lumena Pharmaceuticals for $260 million in May, acquiring with it a pipeline of compounds for rare GI/hepatic conditions.

The firm says its new management has achieved a ‘step-change’ in performance, resulting in accelerated growth and increased shareholder returns over the last 12 months. The firm says it will more than double its 2013 annual product sales to $10 billion by 2020, and that the proposal would deny Shire shareholders the full benefits of Shire’s growth strategy

Susan Kilsby, chairman of Shire, said: “Shire has a long track record of delivering for shareholders and addressing unmet patient needs. Our high-performing management team and focused strategy are producing even stronger results, reflected in our recent top-line growth and increased profitability.”

The firm has called an investor conference call for Monday, but all eyes will now be on AbbVie to see what its next move will be. Thanks to the emergence of several very promising late-stage drugs, AbbVie does not need to complete the takeover as a matter of urgency; this suggests that like Pfizer, the potential tax saving offered by a redomiciling is a prime motivating factor in the bid.

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