AbbVie wants a new legal home with a lower tax rate. To make the move, the drugmaker may have to raise its offer for Shire yet again.
AbbVie, the North Chicago, Illinois-based maker of the top- selling arthritis drug Humira, made a fourth offer yesterday to buy Shire for £30.1 billion pounds. The offer values the Dublin-based company 48 per cent higher than before AbbVie first approached Shire in May.
“I definitely don’t think it’s enough to get the deal done,” Vamil Divan, a New York-based analyst at Credit Suisse, said in a telephone interview. Shire’s foreign tax domicile is “a critical component that gives them a little more power.” By acquiring Shire, which splits operations between the US and the UK, and moving its legal domicile to the UK, AbbVie would save about $1.3 billion by 2020 as its tax rate falls to 13 per cent from 22 per cent, according to Mark Purcell, a Barclays analyst. To reap that benefit, the US drugmaker may need to bid at least 55 pounds a share, said Douglas Miehm, an analyst at RBC Capital Markets.
AbbVie's chief executive officer Rick Gonzalez said in a telephone interview yesterday that he's spoken to most of Shire's major shareholders, and that in his opinion, they back a deal.
AbbVie backtracked from that assertion today. The company issued a statement saying that it hasn’t received written commitments of support from shareholders and, without those, UK takeover rules don’t allow the company to claim backing from investors.
AbbVie made three previous bids of as much as £27.3 billion, a price Shire’s board unanimously rejected, saying it undervalued the company’s prospects for increasing sales of its rare-disease medicines.
AbbVie's attempted cross-border acquisition is the latest proposed by a US company seeking lower taxes and the freedom to spend overseas cash. On June 15, Medtronic agreed to buy Dublin-based Covidien, a maker of medical equipment.
Pfizer also bid $117 billion for London-based AstraZeneca Plc -- and was rejected -- in what would have been the largest deal in drug industry history. Medtronic's offer represented a 29 percent premium on Covidien's shares before the deal was announced. Pfizer's offer had a 53 percent premium, compared with AstraZeneca's price when a transaction was first proposed in January. 55 Pounds The addition of Shire's array of rare disease treatments and drugs for attention deficit hyperactivity disorder would also diversify AbbVie's product portfolio, which is currently dominated by Humira, the rheumatoid arthritis injection. Shire said its board will meet to discuss the bid. The company wasn't given AbbVie's latest proposal ahead of time, Shire said yesterday in a statement. Under UK rules, AbbVie has until July 18th to make a firm offer or walk away. If
AbbVie walks away, it’s precluded in most cases from making another bid for as long as six months. Yesterday’s proposal, which is an 11 percent increase over
AbbVie’s previous one, “should help get both parties closer to negotiating a final offer,” Miehm, the RBC Capital analyst, wrote yesterday in a note to clients. “We believe that if both companies were to sit down, a clearing price for the deal could be in the £55-58 range.”
Bloomberg
