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AbbVie agrees to buy Shire for £32bn

Published on 18/07/14 at 11:02am
Shire image

Shire has accepted a £32 billion takeover deal from AbbVie after months of rejections and uncertainty.

The firm, which is set to be called ‘New AbbVie’ and based in Jersey, will pay £32 billion ($54.8 billion) to buy the Irish-based speciality company.

New AbbVie, which became a standalone company itself in 2012 after it split from Abbott, says the acquisition will create more value for Shire than it would find on its own.

Shire’s board tends to agree and says in a statement that it believes the deal, which it rejected four times because the price was too low, is now in the interests of its shareholders.

Shire shareholders will receive cash and stock valued at £52.48 a share – a price that is 53% above Shire’s closing level on 2 May, before AbbVie made its first proposal to buy the company.

In a deal reminiscent of what Pfizer tried (and failed) to do with AstraZeneca earlier this year, the US group wants the merger so it can base its company in Ireland and the UK to shield offshore cash from higher US tax rates.

The firm says that New AbbVie’s effective tax rate will drop from 22% to just 13% by 2016, as its tax domicile will now be in the UK. AbbVie’s chief executive Richard Gonzalez and his executive team have stated that they won’t move out of the US.

While Shire is based in Dublin for tax purposes, its main executive offices are in Basingstoke, England, whilst its chief executive Flemming Ornskov works in Lexington, Massachusetts.

Gonzalez says: “By combining AbbVie and Shire, we’re creating a unique, diversified biopharmaceutical company. The combined company would benefit from a best-in-class product development platform, a stronger pipeline and more enhanced R&D capabilities.”

Susan Kilsby, chairman of Shire adds: “Shire has a long track record of delivering value for both shareholders and patients. Our growth profile has been accelerated under our new management team who have successfully executed a focused strategy.

“We believe that this offer reflects the substantial value that we have already created for Shire’s shareholders and the strength of our future prospects.

“We also believe that the combined group represents an exciting fit of two complementary businesses that will create a new market leader in specialty pharmaceuticals with a portfolio of fast growing products, a promising pipeline and enhanced growth prospects.”

Stronger together

AbbVie became a stand-alone company in 2012 after it split from Abbott. The two now trade independently with AbbVie focussing predominately on prescription medicines, whilst Abbott’s business is now based on diagnostics.

After the split AbbVie gained rights to the autoimmune drug Humira (adalimumab), which has become the biggest-selling drug in the world, pulling in $10.7 billion in sales last year and making up 57% of its total sales for 2013.

By acquiring Shire, which primarily produces ADHD treatments (making up around 40% of its sales) as well as expensive rare disorder medicines, it could help shake off its reliance on Humira – something analysts have been urging since the split.

AbbVie is developing new medicines for cancer and most notably for the increasingly competitive hepatitis C market, but Shire’s portfolio is more diverse and comes with more immediate benefits.

Ben Adams


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