AbbVie has raised its takeover offer for Shire to around £31bn ($53bn), enough to entice the Irish company to the negotiation table although there is no guarantee a formal offer will be made.
The US pharma giant’s behind-the-scenes entreaties to Shire’s shareholders seem to have paid off with Shire now saying it is in “detailed discussions” over a possible merger and could be prepared to recommend the latest bid “subject to satisfactory resolution of the other terms of the offer.”
AbbVie has hiked both the cash and share components of its latest £53.20 bid, which is now £24.44 plus 0.8960 shares in the combined company for each Shire share currently held. On that basis, shareholders in the Dublin-based company will own around 25 per cent of ‘new AbbVie’ if the deal goes through.
The latest offer is 4 per cent higher than AbbVie’s last rejected bid and helps to overcome a weakening in the US company’s share price last week that had reduced the value of what was on the table.
AbbVie has until Friday to table a firm offer for Shire or under UK takeover rules will have to walk away from the table for at least six months.
The US pharma company wants to buy FTSE-listed Shire to reduce its corporate tax liability – estimating it can cut it from 22 per cent to around 13 per cent by shielding offshore cash from higher US tax rates – as well as to take control of its specialty and rare diseases products and pipeline assets.
Shire has a well-established franchise in attention-deficit hyperactivity disorder (ADHD) drugs, currently headed by Vyvanse (lisdexamfetamine dimesylate), but has latterly built up a portfolio of rare disease therapies such as Elaprase (idursulfase) for Hunter syndrome and Replagal (agalsidase alfa) for Fabry disease.
Shire said recently it expects to be able to double its 2013 annual product sales to $10bn by 2020, pointing to a 19 per cent increase in sales and eight-point increase in profit margins in the last 12 months. It has particularly high hopes for Cinryze (C1 esterase inhibitor) and Firazyr (icatibant), two fast-growing drugs for hereditary angioedema (HAE).
The portfolio would help reduce AbbVie’s over-reliance on arthritis blockbuster Humira (adalimumab), which accounted for around 60 per cent of its total turnover in the first quarter of this year and could face competition from biosimilars as early as the end of 2016.
UK tightening takeover rules
Meanwhile, news of the revised offer comes as UK business secretary Vince Cable has said he will firm up the rules dealing with foreign takeovers of UK firms in the wake of Pfizer’s aborted takeover of AstraZeneca earlier this year.
During that process it became clear that the UK government has limited powers to hold acquiring companies to promises on issues such as staffing levels and R&D, he told the BBC yesterday, adding that the intention is to introduce penalties – including fines – for those that fail to do so.
Despite the fact that Shire is one of the fastest-growing FTSE companies, the takeover by AbbVie has not raised as many concerns in political circles as Pfizer’s attempt on AZ as it is domiciled in Ireland, employs relatively few people in the UK and makes most of its revenues in the US.