Shire enters takeover talks with AbbVie

Shire has started ‘detailed discussions’ with AbbVie over a possible takeover after receiving a revised offer valuing its business at more than £31bn ($53bn).

The latest £53.20 per share offer is a 4 per cent increase on AbbVie’s last bid and was enough to entice Shire’s board to the negotiation table, although the Irish-headquartered company said there is still “no certainty that any firm offer will be made.”

The offer is made up of £24.44 in cash and 0.8960 shares in ‘new AbbVie’ for each Shire share held and – should it go through as it stands – would give the latter’s shareholders a 25 per cent stake in the combined company.

Dublin-based Shire resisted four previous takeover offers from AbbVie insisting they undervalued its business – but showed signs of interest late last week when it agreed to meet with the US company’s management to discuss terms.

The Shire board now says it is prepared to recommend the latest deal to shareholders “subject to satisfactory resolution of the other terms of the offer.” AbbVie has until the end of the week to make a formal offer for the FTSE-listed firm or – under UK takeover rules – will have to back off for six months, much like Pfizer in its pursuit of AstraZeneca earlier this year.

AbbVie has been courting Shire’s shareholders in the weeks since it first tabled an offer for the specialist in attention-deficit hyperactivity disorder (ADHD) drugs and therapies for rare diseases, seeking to bolster its pipeline and gain access to the Irish firm’s low corporate tax rate.

Its efforts seem to have paid off, although chief executive Richard Gonzalez was forced to issue an embarrassing retraction earlier this month after stating publicly that most of Shire’s investors were backing the merger.

Ahead of the weekend one investor – Pentwater Capital Management – told Bloomberg it felt Shire should start discussions and see if AbbVie could be persuaded to table a higher offer.

Combining the two companies will cut AbbVie’s tax rate from around 22 per cent to 13 per cent and provide a profitable ADHD franchise alongside a fast-growing portfolio of rare disease drugs that will reduced the US firm’s reliance on its blockbuster arthritis drug Humira (adalimumab).

Humira accounted for a little under 60 per cent of AbbVie’s revenues in the first quarter of this year but is facing patent expiry in 2016 and – while it is trying to bring a raft of new products through the pipeline including a new combination therapy for hepatitis C – adding Shire would provide welcome diversification of its portfolio.

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AbbVie reveals Shire rejection of $46 billion bid

 

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