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It's on: Shire and AbbVie agree £32bn takeover

Companies agree deal that is set to cut US pharma company’s corporate tax bill
shire abbvie logos

After weeks of playing hard-to-get, Shire has finally agreed a formal takeover offer from AbbVie that could slash the US firm's corporate tax rate.

The final agreement values the Irish firm at £32bn ($55bn) and consists of 0.896 new AbbVie shares and £24.44 in cash for each share in Shire currently held, equivalent to around £52.48. As indicated when Shire agreed to start negotiations earlier this week, shareholders in the drugmaker will own around 25 per cent of the combined company when the deal goes through.

The two companies said that the new business will be incorporated in Jersey and should reduce the firm's tax rate to 13 per cent by 2016, from a level of around 22 per cent at the moment. Its main headquarters will be in Chicago in the US, with a "strong presence in the US and the UK," according to text of the agreement.

There is some degree of urgency for the acquisition on this issue, as the White House in the US is threatening to clamp down on these so-called tax inversion deals, which have been cited as a factor in both Pfizer's aborted takeover attempt for AstraZeneca (AZ) earlier this year and Mylan's planned purchase of Abbott Laboratories' ex-US generics businesses.

A letter sent by US Treasury Secretary Jacob Lew to senior figures the House and Senate finance committees earlier this month suggested the government intends to block companies transferring tax liability in this way unless there is a change in control of the company itself.

Perhaps worryingly for AbbVie and Shire, Lew indicates in the latter that changes to US law should be made retroactive to May 2014.

Of course, AbbVie's pursuit of Shire is not only about tax, as the company also wants to tap into Shire's specialty drugs portfolio and pipeline, particularly its fast-growing position in rare diseases, and dilute the importance of its biggest-selling drug Humira (adalimumab) for arthritis and other immunological diseases. 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.

"By combining AbbVie and Shire, we're creating a unique, diversified biopharmaceutical company," said AbbVie chief executive Richard Gonzalez in a statement today.

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

Shire's chief executive Flemming Ornskov has agreed to lead the integration effort and also to create and head up a rare disease business unit within the new AbbVie after the transaction goes through, reporting to Gonzalez.

"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,” said Shire's chairman Susan Kilsby.

Article by
Phil Taylor

18th July 2014

From: Research, Sales

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