Shire and AbbVie inch closer to a deal after weekend getaway

There's a whiff of inevitability with AbbVie's ($ABBV) quest for Shire ($SHPG), as the latter company has confirmed that the two have found an agreeable price, setting the stage for a potential merger worth about $53.7 billion.

After multiple sources reported that the two companies were spending the weekend in negotiation, Shire said in a statement Monday morning that AbbVie had come up with a figure it could get behind. The new proposal would give each Shire shareholder £24.44 ($41.83) in cash and 0.896 AbbVie shares, making for a 25% stake in the combined company in the end.

Shire's board told AbbVie it would be willing to recommend that offer to shareholders, "subject to satisfactory resolution of the other terms," the company said, and the two groups remain "in detailed discussions" with no guarantees an offer will be made.

If AbbVie chooses to make the roughly $53.7 billion proposal official, it will make for the company's 5th and handsomest offer for Shire, representing a 9.2% premium on the company's Friday close. Under the U.K.'s expansive takeover code, the two have until July 18 to come to terms on a deal. If they can't, AbbVie will have to wait 6 months before it can make another offer, much like Pfizer ($PFE) in its now-paused pursuit of AstraZeneca ($AZN).

In Shire, AbbVie sees a shot at immediate savings and future growth. Thanks to Shire's Irish domicile, buying it would lower AbbVie's effective tax rate to 13% from about 22%, the company has said. Beyond the balance sheet, AbbVie covets Shire's portfolio of rare disease treatments and CNS therapies, looking to curb its dependence on the top-selling biologic Humira.

Shire rejected AbbVie's first three overtures, claiming its suitor was substantially undervaluing its potential. In a self-defense effort, Shire pledged to double its revenue to $10 billion by 2020, counting on on-the-market products like the ADHD treatment Vyvanse and rare disease therapy Firazyr to bring in $7 billion with the remaining $3 billion flowing out of its pipeline.

But AbbVie shareholders seem less optimistic about that potential, as the Abbott Laboratories ($ABT) spinout declined about 2.5% in premarket trading on Monday. Shire, whose shares are up about 45% since AbbVie's courtship began last month, ticked up about 1.5% on the news.

- read Shire's statement (PDF)