AbbVie and Shire square off over a spurned $46B buyout offer

AbbVie ($ABBV) has jumped into the red-hot biopharma M&A game with a vengeance. The pharma company announced late Thursday night that it had made three passes at Shire ($SHPG) in recent weeks, bumping its nonbinding offer to $78.87 a share in cash and stock and getting turned down at each attempt. Its first figure passed to Shire's board in early May--as rumors of a possible buyout began to heat up in earnest--was $67.34 a share.

AbbVie's latest offer for Shire totaled about $46.5 billion. Operating under British M&A rules, AbbVie will now have until July 18 to make a firm offer or be forced to at least temporarily suspend any bidding effort. 

In its release, AbbVie said that negotiations were no longer ongoing, but it confirmed the latest press reports about its interest in Shire and laid out a variety of conditions under which it could renew its bidding. Each of the three bids were made as "indicative offers," a nonbinding figure intended to illustrate AbbVie's intentions as it sought to engage in direct negotiations.

"AbbVie reserves the right to introduce other forms of consideration and/or vary the mix of consideration," the company said in a statement.

Shire Chairwoman Susan Kilsby

In a follow-on statement Friday morning, Shire confirmed that it rebuffed all three AbbVie proposals, most recently on May 30, because they "fundamentally undervalued Shire and its prospects," Chairwoman Susan Kilsby said. And, taking a cue from AstraZeneca ($AZN) and its prolonged fight with Pfizer ($PFE), Shire laid out a bullish map of the future, promising to double its 2013 sales to $10 billion by 2020.

Shire, which has a market cap of about $38 billion, has been a regularly discussed takeover target for years now, with widely admired sales numbers that have been growing with the recent $4.2 billion buyout of ViroPharma and its $350,000-a-year blood disease drug Cinryze. Most recently Allergan ($AGN) has been mentioned as the most likely suitor as it tries to wriggle out of Valeant's ($VRX) grasp. And Shire's Irish domicile and low tax rates hasn't gone unnoticed, particularly after Pfizer made its failed $118 billion offer for AstraZeneca in large part because of the lower tax rate offered by basing the company in the U.K.

Those buyout rumors took on considerable substance earlier this week when Reuters reported that Shire had brought in Citi to advise it on any possible takeover attempts.

Shire CEO Flemming Ornskov

A buyout for AbbVie would create a major global pharma operation with a full set of R&D facilities in North America and Europe. Under CEO Flemming Ornskov Shire has been melding together its once divided research functions, focusing on rare diseases, neuroscience, GI, hematology and more recently opthalmology. Shire spent close to a billion dollars on research last year, compared to $2.9 billion at AbbVie. 

Aside from a prospective tax inversion, AbbVie would also be gaining a company with a variety of business units that could prove to be a profitable addition--particularly in the rare disease field. AbbVie has relied on Humira for most of its revenue and is hustling along a new, late-stage cocktail treatment for hepatitis C to which analysts have given high marks.

Even if AbbVie stays at the bidding table, it may not be alone. A variety of giants in the industry like Amgen ($AMGN), Bristol-Myers Squibb ($BMY) and Biogen Idec ($BIIB) have been mentioned as possible bidders, and that's in the last few days. If Shire's board resolves to follow AstraZeneca's approach and resist a bid, it could also set off on a much larger shopping spree than it has been engaged in up to now.

- here's AbbVie's release
- read Shire's release