Recommended Combination of Shire plc and AbbVie Inc

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN, INTO OR FROM ANY JURISDICTION WHERE TO DO SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH JURISDICTION.

Summary

·         The Boards of AbbVie and Shire are pleased to announce that they have reached agreement on the terms of a recommended combination of Shire with AbbVie.

·         Under the terms of the Merger, Shire Shareholders will be entitled to receive: for each Shire Share: £24.44 in cash and 0.8960 New AbbVie Shares

·         The Merger terms represent:

o    An indicative value of £52.48 per Shire Share based on AbbVie's closing share price of $53.52 on 17 July 2014, the Latest Practicable Date; and

o    An indicative value of £53.19 per Shire Share based on AbbVie's 30-day volume-weighted average price of $54.83 to 17 July 2014, the Latest Practicable Date.

·         The indicative value of £53.19 per Shire Share values the entire issued and to be issued share capital of Shire on a fully diluted basis at approximately £32 billion and represents:

o    A premium of approximately 53 per cent. to the price of Shire Shares of £34.67 on 2 May 2014, being the last Business Day prior to AbbVie's initial proposal;

o    A premium of approximately 42 per cent. to the price of Shire Shares of £37.38 on 19 June 2014, being the last Business Day prior to the commencement of the offer period; and

o    An implied Enterprise Value / Last Twelve Months EBITDA multiple of approximately 24x.

·         The Transaction will create a well-positioned and focused specialty biopharmaceutical company, with sustainable leadership positions within areas of unmet need, including immunology, rare diseases, neuroscience, metabolic diseases and liver disease (HCV) and multiple emerging oncology programs.

·         Immediately following the Transaction, Shire Shareholders are expected to hold New AbbVie Shares representing approximately 25 per cent. of the issued share capital of New AbbVie, thus offering Shire Shareholders the ability to participate in the future prospects of the Combined Group. AbbVie Stockholders are expected to hold New AbbVie Shares representing approximately 75 per cent. of the issued share capital of New AbbVie.

·         AbbVie expects the Transaction to be accretive to AbbVie's adjusted EPS[1] in the first year following completion, growing to above $1.00 per share by 2020, with material ongoing financial and operating benefits. The AbbVie Board also expects the Transaction to reduce New AbbVie's effective tax rate to approximately 13 per cent. by 2016 and provide New AbbVie with access to its global cash flows.

·         AbbVie believes that a potential re-rating of New AbbVie is possible due to continued strength in the Humira® franchise (the world's top selling medicine globally in 2013), the launch of a HCV therapy, advancement of exciting late-stage opportunities in oncology, immunology and other areas, and Shire's complementary rare disease and neuroscience platform.

·         It is AbbVie's intent, upon completion of the Transaction, to maintain a strong commitment to a growing dividend and to implement a significant share repurchase program.

·         The Shire Board, which has been so advised by Citi, Deutsche Bank, Evercore, Goldman Sachs and Morgan Stanley considers the terms of the Transaction to be fair and reasonable. In providing their advice to the Shire Board, Citi, Deutsche Bank, Evercore, Goldman Sachs and Morgan Stanley have taken into account the commercial assessments of the Shire Directors.

·         Accordingly, the Shire Board believes that the terms of the Transaction are in the best interests of Shire Shareholders as a whole and intends to recommend that Shire Shareholders vote in favour of the resolutions to be proposed at the Court Meeting and the General Meeting as the Shire Directors have irrevocably undertaken to do in respect of their own beneficial holdings of 43,242 Shire Shares representing, in aggregate, approximately 0.01 per cent. of the ordinary share capital of Shire in issue on the Latest Practicable Date.

·         The AbbVie Board has approved the Transaction and intends to recommend that AbbVie Stockholders vote in favour of the adoption of the US Merger Agreement.

·         In order to undertake the Transaction, AbbVie has formed a new company, New AbbVie, which is incorporated in Jersey, Shire's current place of incorporation. Following completion of the Transaction, New AbbVie will become the holding company of the Shire Group and the AbbVie Group.

·         Pursuant to the AbbVie Merger, AbbVie Stockholders will receive one New AbbVie Share for each AbbVie Share.

·         It is intended that the New AbbVie Shares will be listed on the New York Stock Exchange (NYSE).

·         It is intended that the Merger will be implemented by means of a court-sanctioned scheme of arrangement between Shire and the Scheme Shareholders under Article 125 of the Companies Law.

·         The Merger will be conditional on, amongst other things, the approval of the Scheme by Scheme Shareholders, the sanction of the Scheme by the Court, the adoption of the US Merger Agreement by AbbVie Stockholders, and the receipt of certain anti-trust clearances. The Conditions to the Merger are set out in full in Appendix I to this announcement.

·         It is expected the Scheme Circular will be published in autumn 2014 and that, subject to the satisfaction, or where relevant waiver, of all relevant Conditions, the Scheme will become Effective and the Transaction will be completed in the fourth quarter of 2014.

Commenting on the Merger, Richard A. Gonzalez, Chairman of the Board and Chief Executive Officer of AbbVie said:

"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.

The combination of AbbVie and Shire is attractive for shareholders of both companies, bringing the potential for strengthened sustainability of top-tier EPS growth, attractive free cash flow and enhanced cash returns to shareholders. The combination would provide us with enhanced access to cash that we can use to expand our portfolio and fund M&A to supplement organic growth."

Commenting on the Merger, Susan Kilsby, Chairman of Shire said:

"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 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."

This summary should be read in conjunction with the full text of the following announcement including the Appendices. The Conditions and certain further terms of the Merger are set out in Appendix I. Appendix II contains bases and sources of certain information contained within this document. Appendix III contains details of the irrevocable undertakings given to New AbbVie. Appendix IV contains the definitions of certain terms used in this announcement.

There will be an investor call at 2.00pm BST / 8.00am CST. Dial-in details are set out below:
UK toll free : 0800-279-9630
US toll free : 866-617-1526
International: 001-210-795-0624
Passcode: AbbVie

Enquiries:

AbbVie Investor Contacts 

Larry Peepo (Tel: +1 847 935 6722)

Liz Shea (Tel: +1 847 935 2211)

AbbVie Media Contacts 

Jennifer Smoter (Tel: +1 847 935 8865)

Adelle Infante (Tel: +1 847 938 8745)

Angela Sekston (Tel: +1 847 937 6636)

J.P. Morgan (Financial Adviser to AbbVie)

Jeffrey Hoffman (New York, Tel: +1 212 270 6000)

Henry Gosebruch

Benjamin Wallace

Laurence Hollingworth (London, Tel: +44 207 742 4000)

Dwayne Lysaght

James Robinson

Brunswick Group (PR Contacts)

Richard Jacques (Tel: +44 207 404 5959)

Justine McIlroy

Shire Investor Contact 

Jeff Poulton (Tel: +1 781 482 0945)

Shire Media Contact

Stephanie Fagan (Tel: +1 201 572 9581)

Citi (Financial Adviser to Shire)

Christopher Hite (Tel: +1 212 816 1818)

Jan Skarbek (Tel: +44 20 7986 4000)

Deutsche Bank (Financial Adviser to Shire)

Nick Bowers (Corporate Broking) (Tel: +44 20 7545 8000)

Ben Lawrence (Corporate Broking)

Evercore (Financial Adviser to Shire)

Francois Maisonrouge (Tel: +44 20 7653 6000)

Edward Banks

Goldman Sachs (Financial Adviser to Shire)

Anthony Gutman (Tel: +44 20 7774 1000)

Raj Shah

Morgan Stanley (Financial Adviser to Shire)

Michele Colocci (Tel: +44 20 7425 8000)

Colm Donlon

Peter Moorhouse (Corporate Broking)

FTI Consulting (PR Contacts)

Andrew Lorenz (London) (Tel: +44 77 7564 1807)

Ben Atwell (London) (Tel: +44 20 3727 1000)

David B. Roady (New York) (Tel: +1 212 850 5600)

Robert Stanislaro (New York) (Tel: +1 212 850 5600)

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