AbbVie Offers $51 Billion for Shire

By Dow Jones Business News, 
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LONDON-- AbbVie Inc. on Tuesday raised its offer for Shire PLC to more than $51 billion, its fourth attempt to bring the Dublin-based pharmaceutical company's board to the negotiating table.

The offer was pitched after a week of meetings between the U.S. company and its advisers and Shire shareholders. AbbVie says it has now spoken to investors representing a majority of Shire's outstanding shares.

AbbVie said its cash-and-stock offer represented GBP51.15($87.55) a share, an 11% rise on its previous offer and a 48% premium to Shire's share price the day before its first offer in early May. The mix of cash and stock is roughly the same and would leave Shire shareholders holding around 24% of the enlarged company. If they accept the offer, Shire shareholders would get GBP22.44 in cash and 0.8568 of an ordinary AbbVie share for each Shire share they own.

Shire said its board was meeting to consider the proposal and would make an announcement in due course. It added that AbbVie didn't make its revised proposal to Shire before announcing it publicly.

The steep premium of the offer comes as U.S. firms, particularly in pharmaceuticals, scramble to lock in overseas partners in a bid to benefit from lower corporate taxes offshore. AbbVie has said it wants to reincorporate in the U.K. after buying Shire, a so-called inversion deal that could lower its tax rate. Last month, Medtronic Inc. agreed to buy Covidien PLC for $42.9 billion in the latest successful inversion deal.

But other proposed inversions haven't panned out. Earlier this year, Britain's AstraZeneca PLC spurned several offers by Pfizer Inc., which eventually raised its price to some $120 billion. Swedish drug maker Meda AB has turned down Mylan Inc.'s approaches.

AbbVie said the new offer "reflects a substantial sharing of potential synergies between the shareholders of each company," and added that it "strongly encourages shareholders" to consider the proposal and communicate their perspective to Shire's board. The company hasn't ruled out taking its offer direct to shareholders if Shire's board rejects the offer a fourth time.

The required increase in leverage to fund Tuesday's bid could potentially endanger AbbVie's investment grade credit rating, analysts at Barclays said in a note to clients, although the bank estimates that re-domiciling to the U.K. could yield $1.3 billion in tax savings for the company by 2020.

AbbVie Chief Executive Richard Gonzalez said the Shire shareholders he met with "clearly understand the strategic rationale" of an AbbVie takeover of Shire.

"I believe they were generally supportive of the transaction," he said in an interview Tuesday. "This offer is responsive to the feedback we received during interactions with shareholders."

One investor The Wall Street Journal spoke to Monday, who manages a fund for a top 20 Shire shareholder, said he " wasn't wild" about the company's previous rejections of AbbVie's advances. Analysts at Sanford Bernstein said in a note to clients Tuesday the new approach was "a good offer for Shire given some of the uncertainties regarding the long-term growth profile," adding "we believe this will be enough to start discussions for a deal."

Shire shareholders appeared to take the new offer cautiously Tuesday. Despite the premium on offer, shares were up just up 0.2% to GBP46.62 a share in early afternoon trading in London, well below AbbVie's current offer.

Shire, which specializes in drugs to treat attention-deficit disorder and rare diseases, rejected a $46 billion takeover offer from AbbVie last month, saying it undervalued the company's growth prospects, and highlighting concerns on the execution risk of a deal.

Since then AbbVie has set out its rationale for the deal. Shire has also set out new financial targets to highlight its merits as an independent company, including plans to boost sales to $10 billion by 2020 from $4.9 billion in 2013. Shire Chief Executive Flemming Ornskov has said he thinks the main rationale for a deal is the tax inversion, and that overlap between the two companies' disease areas is limited.

Mr. Ornskov wants to increase Shire's focus on drugs to treat rare diseases, through signing deals of his own to make Shire a world-leading biotech player. He has compared Shire to U.S. biotech giants Biogen Idec Inc. and Celgene Corp.

North Chicago, Ill.-based AbbVie, which was spun off from Abbott Laboratories in early 2013, is trying to reduce its reliance on sales of rheumatoid-arthritis drug Humira, the world's top-grossing prescription drug, responsible for more than half of its sales. It is also working on late-stage treatments for drugs in the fields of hepatitis C, cancer and multiple sclerosis. It first began evaluating Shire as a potential takeover target last fall.

Under U.K. takeover rules, AbbVie has until July 18 to make a firm bid for Shire or walk away.

Tapan Panchal and Ian Walker in London contributed to this article.

Write to Hester Plumridge at Hester.Plumridge@wsj.com and Peter Loftus at peter.loftus@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires


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