AbbVie Inc. made a fourth offer to buy Shire Plc, raising the price to about 30.1 billion pounds ($51.5 billion) in an effort to force negotiations. Shire said its board would meet to discuss the bid.
AbbVie increased the offer by about 11 percent to 51.15 pounds a share in cash and stock, the drugmaker said in a statement today. AbbVie made three previous bids, escalating to 27.3 billion pounds, a price that Shire’s board unanimously rejected, saying it undervalued the comany’s prospects for increasing sales of its rare-disease medicines.
The deal comes amid a lot of activity, including middle-market M&A, in the pharmaceutical sector. In June, Endo International plc (Nasdaq: ENDP) agreed to pay $575 million for Dava Pharmaceuticals. In May, Shire made a $260 million deal for pharmaceutical group Lumena.
Shire, in a separate statement today, said it wasn’t presented with AbbVie’s latest proposal before it was made public, and the company advised investors to take no action. AbbVie Chief Executive Officer Richard Gonzalez said in an interview that his company talked with Shire’s top 20 shareholders before making its bid.
“AbbVie has made a compelling offer to Shire that creates immediate and long-term value to shareholders of both companies,” Gonzalez said in the company statement. “We think its shareholders should strongly encourage the Shire board to engage in constructive dialogue with AbbVie.”
Gonzalez wouldn’t say in the telephone interview if the offer made is final. The company is not in direct talks with Shire’s board at this time, he said.
Navid Malik, a London-based analyst at Cenkos Securities plc, said AbbVie can sweeten the deal by increasing the cash-to- stock ratio of its offer, which currently gives Shire shareholders 22 pounds per share in cash.
“The market’s quite disappointed with the cash component,” Malik said by telephone. “The mix looks like it could be improved. A lot of the shareholders in Shire are invested in Shire because it’s a high-growth story. They probably want to be compensated for holding paper which, for a combined pharmaceutical company, may not grow as fast.”
Buying Shire would allow North Chicago, Illinois-based AbbVie to have its tax domicile in the U.K., which has a lower tax rate than the U.S. The addition of Shire’s array of rare disease treatments and drugs for attention deficit hyperactivity disorder would also diversify AbbVie’s product portfolio, which is currently dominated by a single medicine, the arthritis therapy Humira.
Shire rose 0.2 percent to 46.60 pounds at 1:55 p.m. in London. AbbVie put the value of its previous bid at 46.26 pounds a share.
Flemming Ornskov, Shire’s CEO since May last year, has argued to keep his company independent, projecting that product sales will double to $10 billion by 2020 as Shire expands in drugs for eye maladies and rare diseases.
Ornskov has also touted his resume, including bringing the blockbuster eye drug Lucentis to Novartis AG, and cost cutting and improved profit in his first year as Shire’s CEO, hoping to convince investors to leave Shire’s management with him.
AbbVie executives and their bankers have spoken to investors who collectively own a majority of Shire’s stock, AbbVie said today. Shareholders should let Shire’s board know their view of the new offer, the U.S. company said. AbbVie hasn’t ruled out making a hostile bid, Gonzalez said June 25.
Under U.K. rules, AbbVie has until July 18 to make a firm offer or walk away. If it walks away, it’s precluded in most cases from making another bid for as long as six months.
The value of the new bid is in line with the average analyst estimate compiled by Bloomberg News last month. Still, AbbVie may need to pay 55 pounds a share to get Shire’s board to agree to sell, said Ori Hershkovitz, a partner at Sphera Funds Management in Tel Aviv. The fund owns Shire stock.
“It’s a nice price,” Hershkovitz said by telephone. “I think they could squeeze out a little more.”
AbbVie’s bid for Shire is the latest attempted merger in a period of increased acquisition activity in the drug and medical device industry. Not including the AbbVie offer, there were deals proposed or completed worth about $260 billion in the second quarter, according to data compiled by Bloomberg, five times more than any quarter since at least 2009. Pfizer Inc.’s $117 billion rebuffed bid for AstraZeneca Plc was the largest proposed deal in drug industry history.
Companies such as Bristol-Myers Squibb Co. and Allergan Inc. may also be interested in pursuing Shire, analysts have said.
Shire’s tax domicile is in Dublin, its main executive office is in Basingstoke, England, and the CEO, Ornskov, works in the U.S., in Lexington, Massachusetts. AbbVie has said the combined company would be domiciled in the U.K.
Drugs for ADHD, including Vyvanse and Adderall XR, accounted for about 39 percent of Shire’s revenue last year.
Additional reporting by Allison Collins.