AbbVie to Buy Shire for $54.8 Billion as Drug Deals Surge
Bloomberg News
agreed to buy Shire Plc (SHP) for about 32 billion pounds ($54.8 billion), becoming the latest U.S. health-care company to shift its tax residence abroad in a record surge in industry deals.
Shire holders will receive cash and stock valued at 52.48 pounds a share, the companies said in a statement today. The price is 53 percent above Shire's closing level on May 2, before AbbVie made its first proposal to buy the company. The deal caps AbbVie's 2 1/2-month pursuit of Shire.
The agreement will move AbbVie's tax residence, though not its management, to the U.K. in a so-called tax inversion, dropping the company's tax rate to 13 percent from 22 percent. Shire's treatments for attention deficit hyperactivity disorder and rare diseases will diversify AbbVie's portfolio, which is dominated by a single drug, the arthritis medicine Humira.
Under British takeover rules, AbbVie, based in North Chicago, Illinois, needed to make a formal offer by 5 p.m. London time today or it would be prevented from bidding for six months in most circumstances.
Negotiating teams from both companies met yesterday at the law offices of Davis Polk & Wardwell in New York in an effort to finalize terms and announce a deal, said a person with knowledge of the matter who asked not to be identified discussing private information.
Shire's board said July 14 it would be willing to back AbbVie's latest offer, and that it was in talks with the company about issues other than price. Today's offer of 24.44 pounds a share in cash and 0.896 of an AbbVie share is the same as the offer announced July 14.
Shire Gains
Shire rose 1.9 percent to 48.95 pounds at 10:05 a.m. in London. Before today, the stock had surged 69 percent this year amid speculation the company would be acquired.
The U.S. government has been scrutinizing tax inversions, and Senator Ron Wyden, a Democrat from Oregon, is proposing a bill that would make them more difficult to do. In the negotiations, Shire sought protection in case the U.S. passes a law that undercuts AbbVie's tax benefits and puts the deal's closing at risk, said two people with knowledge of the matter.
AbbVie Chief Executive Officer Richard Gonzalez and his executive team won't move out of the U.S. While Shire is based in Dublin for tax purposes, its main executive offices are in Basingstoke, England, and Chief Executive Officer Flemming Ornskov works in Lexington, Massachusetts. AbbVie has said the combined company's tax domicile will be in the U.K.
Tax Moves
The tax move is only the industry's latest.
said July 14 it will buy Abbott Laboratories' generic-drug business and incorporate the new company in the Netherlands. Medtronic Inc., a Minneapolis-based medical-device maker, on June 15 announced a $42.9 billion takeover of Dublin-based Covidien Plc.
's $117 billion failed bid this year for London-based AstraZeneca Plc -- which would have been the largest in industry history -- ran into the U.K. Takeover Panel's deadline as the companies couldn't agree on a price.
AbbVie will gain a series of rare disease drugs, including Elaprase for Hunter syndrome, a genetic disorder, and Replagal, to treat Fabry disease. It also inherits experimental products, including lifitegrast for dry eye, and Premiplex for a potentially blinding eye disorder in infants. Premiplex could generate more than $1 billion annually if it reaches the market, said Jason Gerberry, an analyst at Leerink Partners.
ADHD Drugs
Drugs for attention deficit disorder, including Vyvanse and Adderall XR, accounted for about 39 percent of Shire’s revenue last year.
Ornskov had argued for keeping Shire independent, projecting that product sales will double to $10 billion by 2020. He also pointed to his record, including bringing the blockbuster eye drug Lucentis to Novartis AG and improving profit in his first year as Shire's CEO, hoping to convince investors to leave Shire's management with him.
AbbVie's bid for Shire is the latest merger in a period of increased acquisition activity in the drug and medical-device industry. Not including the AbbVie offer, there were deals proposed or completed worth $264 billion in the second quarter, according to data compiled by Bloomberg, five times more than any quarter since at least 2009.
For Related News and Information: AbbVie-Shire Takeover Talks Seen Focusing on Tax, Price Risk
To contact the reporters on this story: Simeon Bennett in Geneva at sbennett9@bloomberg.net; Caroline Chen in New York at cchen509@bloomberg.net
To contact the editors responsible for this story: Phil Serafino at pserafino@bloomberg.net Thomas Mulier
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