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AbbVie raises bid for U.K.’s Shire Pharmaceuticals

"You only want me for my tax residency," the jilted bride sobbed as she clutched her $1.6 billion check."You only want me for my tax residency," the jilted bride sobbed as she clutched her $1.6 billion check.
"You only want me for my tax residency," the jilted bride sobbed as she clutched her $1.6 billion check.Bloomberg--Getty Images

Chicago-based biopharma specialist AbbVie Inc. (ABBV) returned to said Tuesday it’s raised its offer for Shire Pharmaceuticals Plc (SHPG) for the third time, valuing the U.K.-based company at over $51.2 billion.

AbbVie said it had made its new offer after consulting with investors who own over half of Shire’s stock, suggesting–but not saying outright–that it thought those shareholders would be prepared to accept the new offer.

Shire’s board has already rebuffed three approaches from AbbVie, and the Chicago company’s statement appeared to imply that it would be confident of succeeding in a hostile bid  at the new level if Shire’s board continues to resist. A spokesman declined to confirm that but said AbbVie “hadn’t ruled anything out”.

In a brief statement, Shire said its board “will meet to consider the proposal and a further announcement will be made in due course.”

It advised shareholders “strongly” to take no action in the meantime.

AbbVie’s bid, which values Shire at 10% above its current share price, would consist of both cash and stock, with Shire investors receiving GBP22.44 in cash and 0.8568 AbbVie shares for every Shire share. AbbVie said it had raised the cash component by GBP2.10 a share from its previous bid.

AbbVie chief executive Richard Gonzalez said the bid would combine two companies with “leadership positions in specialty pharmaeuticals”, creating “a global market leader with unique characteristics and a compelling investment thesis.”

Analysts also note that AbbVie, like other U.S. pharma and healthcare companies, is looking to pay a lower tax rate by domiciling the new company in the U.K., an echo of the logic that drove Medtronic Inc’s (MDT) $49 billion bid for Covidien Plc (COV)  and Pfizer Inc’s (PFE) bid for AstraZeneca Plc  (AZN)

“We believe that (the Shire board) probably need to get into talks,” given the new bid, said Navid Malik, a healthcare analyst with Cenkos Securities in London.

Malik said he wasn’t convinced that investors would necessarily accept the new offer, as the company has a proven track record and he had confidence it could deliver on its promise of doubling revenue between now and 2020. Earnings have risen at an average 33% a year since 2008 and Shire is forecasting another rise of over 25% this year.