Shire ($SHPG) has refused to negotiate with a dogged AbbVie after four increasingly priced overtures, and now, with a $51.5 billion offer on the table, AbbVie ($ABBV) is pressing shareholders to badger the company into agreeing to a sit-down.
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| AbbVie CEO Richard Gonzalez |
As Bloomberg reports, AbbVie has reached out to Shire's major investors to make the case for a deal, and the effort appears to be working. Shire shareholders have made calls, sent letters and held meetings with company officials, echoing CEO Richard Gonzalez's message that a merger would maximize the potential of both. And that's no coincidence, as AbbVie executives have spent time on the phone and in person trying to sway Shire's backers, Bloomberg's sources say, hoping a groundswell of pressure will force the company to start negotiating.
AbbVie's urgency is likely driven by a provision of the U.K.'s expansive takeover code, which imposes a July 18 deadline for the proceedings. If the two haven't struck a deal by then, 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.
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| Shire CEO Flemming Ornskov |
In its own defense, Shire has taken a page from AstraZeneca, laying out an ambitious plan to double its revenue to $10 billion a year by 2020. About $7 billion of that will coming from on-the-market products like the ADHD treatment Vyvanse and rare disease therapy Firazyr, with the the remaining $3 billion flowing out of Shire's pipeline. And that figure doesn't include any potential M&A, something CEO Flemming Ornskov has hardly been shy about in his roughly 18 months on the job.
But through it all, Shire has never explicitly ruled out taking a buyout, instead dismissing AbbVie's first three offers as too cheap. Whether the latest one, 11% bigger than its predecessor, is handsome enough for management remains to be seen, but some shareholders believe its a good starting point for a broader discussion, Bloomberg reports.
"As a substantial shareholder, I think it's now appropriate for the Shire board to engage with AbbVie management and provide due diligence to see if AbbVie can be encouraged to put a larger premium on the table," Pentwater Capital Management CEO Matthew Halbower told the news service.
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