Intent on nailing a big Shire buyout, AbbVie boosted its premium offer by 11% this morning, bringing the total to a bit more than $51 billion.
The revised proposal includes £22.44 in cash and 0.8568 ordinary shares of "New AbbVie" for each share of Shire ($SHPG). "The Fourth Proposal represents an indicative value of £51.15 as of July 7, 2014," AbbVie ($ABBV) said in a statement. Going back to April, just before AbbVie started peppering Shire's board with offers, the new bid represents a 75% premium over the company's stock price.
The latest offer is a clear indication that AbbVie intends to complete this deal. Unlike the global squabble over Pfizer's ($PFE) bid for AstraZeneca, Shire's board has been focused solely on the share price. The buyout process is playing out without the furor that greeted Pfizer in the U.K.--British politicians have remained firmly on the sideline, not all that concerned about a company that's been downsizing its R&D operations in the U.K. while growing facilities in the U.S. and domiciling the company in Ireland.
That tax base is one of the key attractions for AbbVie, which wants to take advantage of the lower corporate tax rates Shire enjoys. For AbbVie, which has been pushing hard to expand its product base away from its dependence on Humira, it's also a chance to become an overnight player in the lucrative rare-disease field.
Shire quickly acknowledged the offer Tuesday morning and said its board will meet to discuss the new bid.
Under Shire CEO Flemming Ornskov, the once divided R&D group has been melded into a single unit focused on rare diseases and ophthalmology. But his biggest impact came through M&A deals of his own. The $4.2 billion acquisition of ViroPharma added the hereditary angioedema drug Cinryze, complementing its Firazyr franchise. And Ornskov had his eye on NPS Pharma, coveting the orphan drug Gattex. Up to now, though, Shire has been heavily dependent on its ADHD blockbuster Vyvanse for much of its revenue.
The latest bid for Shire is conditional on the company's willingness to open up its books for some due diligence. Under British takeover rules, AbbVie has until July 18 to make a firm offer for Shire. If that doesn't happen, then AbbVie would have to wait at least a few months before it could begin the process again. Clearly, though, AbbVie is in no mood to wait.
Over the past few days, CEO Richard Gonzalez and other AbbVie execs have been trekking to the U.K. to engage Shire's shareholders in discussions. This kind of charm offensive is part of the well-choreographed merger game. Ornskov, who arrived at the helm last year, has already signaled his willingness to go along with a merger. And the Shire board has kept up its part of the dance by consistently refusing to yield to AbbVie's initial offers, waiting to see just how high AbbVie is willing to go to get to the bargaining table.
This morning AbbVie's eagerness was all too apparent. And that should pay off handsomely for Shire's investors, who Gonzalez says have received him with open arms.
"We have met with the majority of shareholders, they understand the strategic rational," the CEO told the Financial Times today. "I believe they are generally supportive of this transaction and this offer is indicative of those discussions.".
|AbbVie CEO Richard Gonzalez|
"This transaction is a combination of two leading companies with leadership positions in specialty pharmaceuticals that would create a global market leader with unique characteristics and a compelling investment thesis," Gonzalez said in a statement. "AbbVie will bring greater financial strength and R&D experience to this combination that will enable both companies to reach their full potential for their shareholders and patients in need across the globe. AbbVie has made a compelling offer to Shire that creates immediate and long-term value to shareholders of both companies. We think its shareholders should strongly encourage the Shire board to engage in constructive dialogue with AbbVie."
- here's the release